Trade Liberalization and its Fiscal Implications in a North-South Trade Model

Joachim Stibora () and Albert de Vaal ()
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Joachim Stibora: Kingston University London
Albert de Vaal: Radboud University Nijmegen, Postal: Nijmegen School of Management, Department of Economics, Radboud University Nijmegen, The Nether-, lands

No 2007-1, Economics Discussion Papers from School of Economics, Kingston University London

Abstract: We study the fiscal implications of trade liberalization in a North-South trade model with nonhomothetic preferences. Combining a Ricardian trade model with a continuum of competitive goods and a public good, nonhomothetic preferences imply that both the global income distribution and the local income distribution matter for gauging the effects of different trade liberalization regimes on income taxes and public good provision. The fiscal implications of tariff reductions are typically more adverse for poorer countries than for richer countries. We also find that unilateral trade liberalization by richer countries is a more viable policy option to pursue than multilaterally reducing tariffs.

Keywords: Ricardian trade model; Asymmetric demand complementarities; Trade liberalization; Tax reform; Public goods; Income distribution (search for similar items in EconPapers)
JEL-codes: F11 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2007-02-09
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:ris:kngedp:2007_001

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