The Trade and Welfare Consequences of U.S. Export-Enhancing Tax Provisions

Donald Rousslang and Stephen P. Tokarick
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Stephen P. Tokarick: International Monetary Fund

IMF Staff Papers, 1994, vol. 41, issue 4, 675-683

Abstract: The U.S. tax code contains two provisions that encourage exports by reducing the U.S. corporate income tax on export profits. In this paper we use an applied general equilibrium model of the U.S. economy to estimate the trade and welfare consequences of eliminating these tax provisions. We find that the provisions ameliorate the trade-discouraging effects of U.S. tariffs, but that they also adversely affect the U.S. terms of trade to such an extent that eliminating the provisions is likely to improve U.S. domestic welfare. We also find that a tariff reduction that replicates the trade effects of removing the tax provisions would interact differently with other distortions in the model and would have different effects on welfare.

JEL-codes: C68 F13 (search for similar items in EconPapers)
Date: 1994
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