Optimal Tariffs: Theory and Practice

Ali Ibrahim, Arvind Subramanian and Luis Torres-Castro

No 1993/050, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the theory underpinning the design of optimal tariffs in a developing economy, and the experience of implementation of tariff reforms. A central issue is whether and when a case can be made for a uniform tariff structure. While theory advocates a differentiated tariff structure (except under a balance of payments objective), political economy considerations, inadequate information, and administrative convenience point to a minimally differentiated tariff structure. The experience of reform indicates that tariff structures are mainly influenced by income distribution and protection objectives. The ability to successfully reduce tariffs depends on measures taken to alleviate fiscal and balance of payments constraints.

Keywords: WP; tariff structure; tariff reform; tariff level; drawback-type scheme; input tariff increase; tariff rate; duty drawback; consumer goods; tariff reduction; tariff increase; Tariffs; Income distribution; Imports; Real effective exchange rates; Duties; Africa (search for similar items in EconPapers)
Pages: 64
Date: 1993-06-01
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