Tariff Reform in a Small Open Multi-household Economy with Domestic Distortions and Nontraded Goods

Walter Diewert, A H Turunen-Red and Alan Woodland

International Economic Review, 1991, vol. 32, issue 4, 937-57

Abstract: The authors examine tariff reforms in the context of a small open economy and simultaneously deal with three extensions of the current literature: nonremovable domestic tax distortions, nontraded goods, and many households. Using the new concepts of a constant-utility, tax-adjusted, balance-of-trade function and a constant-utility productivity improvement in tariffs, necessary and sufficient conditions for the existence of strict Pareto improving tariff and transfer reforms are established. The authors also consider directional tariff and transfer reforms such as movements toward the world price vector, proportional reductions, and reductions of extreme tariffs. Also discussed is the role of normality of household preferences. Copyright 1991 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1991
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