Economics at your fingertips  

The distributional consequences of trade liberalization: Consumption tariff versus investment tariff reduction

Stephen J Turnovsky () and Jorge Rojas-Vallejos

Journal of Development Economics, 2018, vol. 134, issue C, 392-415

Abstract: This paper uses numerical simulations to highlight the contrasting effects of consumption and investment tariff reductions on the dynamic adjustments of key measures of aggregate activity and inequality. The consumption tariff has only a weak effect on activity. If implemented instantaneously it leads to a negligible reduction in wealth inequality but a substantial increase in income inequality. If gradual, it causes a more significant decline in wealth inequality but a milder increase in income inequality. A comparable reduction in an investment tariff increases activity significantly. It leads to a significant long-run reduction in wealth inequality if implemented instantaneously, which is moderated if introduced gradually. It is associated with a tradeoff between the short-run and long-run effects on income inequality, reducing it in the very short run, while increasing it slightly over time. The simulations are supplemented with extensive sensitivity analysis, suggesting some sensitivity to key structural parameters.

Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

Access Statistics for this article

Journal of Development Economics is currently edited by M. R. Rosenzweig

More articles in Journal of Development Economics from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

Page updated 2019-04-07
Handle: RePEc:eee:deveco:v:134:y:2018:i:c:p:392-415