Welfare effects of tariffs and investment taxes

J. Peter Neary

No 198801, Working Papers from School of Economics, University College Dublin

Abstract: This paper derives first- and second-best levels of optimal tariffs and taxes on internationally mobile capital in a general model of an open economy. When world prices are fixed (so that non-intervention is optimal), iso-welfare contours in tax-tariff space are shown to be ellipses centred around the origin which are tilted upwards if and only if importables are relatively capital-intensive. Under plausible assumptions, the same is true in the large open economy case, except that the contours are now ellipses centred around the non-zero first-best intervention point.

Keywords: Tariff; Investments--Taxation; Welfare economics; Commercial policy (search for similar items in EconPapers)
Date: 1988-01
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