Welfare effects of unilateral changes in tariffs: the case of Motor vehicles and parts in Australia

Peter Dixon and Maureen Rimmer

Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre

Abstract: We derive formulas for the optimal tariff rate in four theoretical models. We start with a model in which industries are competitive and then successively allow for: monopoly pricing by export industries; revenue-replacement costs; and cold-shower effects. The theoretical formulas accurately explain results from MONASH, a detailed CGE model. A critical parameter in determining the optimal tariff is the export-demand elasticity. Modellers are often reluctant to adopt empirically justifiable values for export-demand elasticities because such values generate embarrassingly large optimal tariff rates. A way out of this dilemma is the adoption of a non-linear cold-shower specification.

Keywords: optimal tariff; export-demand elasticities; cold-shower effect; monopoly pricing; revenue-replacement costs (search for similar items in EconPapers)
JEL-codes: C68 F13 F14 (search for similar items in EconPapers)
Date: 2008-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.copsmodels.com/ftp/workpapr/g-177.pdf Initial version, 2008-09 (application/pdf)
https://www.copsmodels.com/elecpapr/g-177.htm Local abstract: may link to additional material. (text/html)

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: https://EconPapers.repec.org/RePEc:cop:wpaper:g-177

Access Statistics for this paper

More papers in Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre Contact information at EDIRC.
Bibliographic data for series maintained by Mark Horridge ().