Tariff simplification, privatization, and welfare superiority

Ya‐Po Yang, Qidi Zhang and Leonard F. S. Wang

Metroeconomica, 2022, vol. 73, issue 2, 683-707

Abstract: In importing trade model, Cournot competition occurs between domestic semi‐public and foreign firms in domestic market; the government implements specific/ad valorem tariff. We examine the welfare effect of tariff simplification. Under general demand function, when semi‐public firms are more efficient than foreign firms with low/high privatization, tariff simplification hurts/benefits the domestic country. When semi‐public firms are less efficient than foreign firms with medium privatization, tariff simplification hurts the domestic country; else, it benefits the domestic country. When the government adopts optimal tariff rate and optimal privatization, and domestic semi‐public firms are less efficient than foreign firms, optimal privatization increases after tariff simplification.

Date: 2022
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