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Trade and Tax Reforms in a Cash-in-Advance Economy

Theodore Palivos and Nikos Tsakiris ()

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: We examine the effects of both tariff-only and coordinated trade-tax reforms on market access, government revenue and welfare for a small monetary economy, under the assumption that a certain fraction of purchases of each good must be ?nanced with cash held in advance. We show that if the cash requirement ratio in the exportable sector is greater than that in the importable then, contrary to previous results: i) a uniform radial reduction of tariffs has ambiguous effects on both welfare and market access, ii) tariff and consumption tax reforms that leave consumer prices unchanged may be more efficient in improving market access and welfare than a reform that involves only tariffs and iii) export and production tax reforms that keep producer prices unchanged may be welfare deteriorating.

Keywords: Tariff and Tax Reforms; Export and Production Tax Reform; Cash-in-Advance Constraint. (search for similar items in EconPapers)
JEL-codes: F13 H20 E10 (search for similar items in EconPapers)
Date: 2010-04, Revised 2010-04
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Related works:
Journal Article: Trade and Tax Reforms in a Cash-in-Advance Economy (2011) Downloads
Working Paper: Trade and Tax Reforms in a Cash-in-Advance Economy (2009) Downloads
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