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Border tax adjustments and tariff‐tax reforms with consumption pollution

Nikos Tsakiris, Panos Hatzipanayotou and Michael Michael

Journal of Public Economic Theory, 2019, vol. 21, issue 6, 1107-1125

Abstract: We develop a model of a small open economy, where pollution per unit of consumption between domestically produced and imported quantities of the same good differs. We show that the first‐best policy combination calls for consumption taxes on all polluting goods, and border tax adjustment (BTA) measures, that is, tariffs or import subsidies. We identify conditions under which well‐known tariff‐tax reform policies for developing economies, such as a consumer‐price‐neutral piecemeal reform of trade and a consumption tax, and a consumer‐price‐neutral reform of all trade and consumption taxes improve welfare. We also evaluate whether reforms of trade taxes alone are superior to consumer‐price‐neutral reforms of trade and consumption taxes.

Date: 2019
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https://doi.org/10.1111/jpet.12407

Related works:
Working Paper: Border Tax Adjustments and Tariff-Tax Reforms with Consumption Pollution (2018) Downloads
Working Paper: Border Tax Adjustments and Tariff-Tax Reforms with Consumption Pollution (2018) Downloads
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