Tariffication of a Distorted Economy: A CGE Analysis

William Kaempfer, Martin T. Ross and Thomas F. Rutherford

Review of Development Economics, 1997, vol. 1, issue 2, 207-218

Abstract: This paper examines the consequences of the tariffication of a quota when there are several potential distortions present in a country, including domestic monopoly and wage rigidities. It is generally presumed that tariffs are superior to quotas because of their transparency and revenue‐raising attributes. However, in the presence of multiple distortions, liberalization of a single policy instrument may result in net welfare losses. The findings suggest that, in a general equilibrium context, such a liberalization policy will have ambiguous effects upon aggregate domestic welfare in the country undertaking the tariffication.

Date: 1997
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