Tariff-Tax Reforms in Large Economies.
Juha. Tervala
Bok Engelsk 2012 · Electronic books.
| Omfang | 1 online resource (33 pages)
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| Utgave | 1st ed.
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| Opplysninger | Cover -- Contents -- Abstract -- I. Introduction -- II. The Model -- A. Households -- B. The Government -- C. Firms -- D. The Consolidated Budget Constraint -- E. The Initial Steady State -- III. Parameterization -- IV. Revenue neutral tariff-tax reform -- V. Point-For-Point Tariff-Tax Reform -- VI. Conclusions -- References -- Tables -- 1. Tariff Reductions under the Uruguay Round -- 2. Model Parameterization -- 3. Impact of a domestic tariff-tax reform on the DPV of domestic, foreign and world -- 4. Sensitivity analysis: The sign of the welfare effect of a domestic tariff-tax reform -- 5. Impact of a domestic tariff-tax reform on the DPV of domestic, foreign and world -- Figures -- 1. Effects of a Domestic Revenue Neutral Tariff-Tax Reform -- 2. Effects of a Domestic Point-For-Point Tariff-Tax Reform -- References.. - This paper studies tariff-tax reforms in a calibrated two-region global New Keynesian model composed of a developing and an advanced region. In our baseline calibration, a revenue-neutral reform that lowers tariffs in developing countries can reduce domestic welfare. The reason is that the increase in developing countries welfare due to higher output is dominated by the welfare losses stemming from the deterioration of the terms of trade. On the other hand, the reform increases output and welfare in the advanced countries and in the world as a whole. The effects that we highlight have not been studied in previous contributions to the literature, which typically looks at tariff-tax reforms using a small open economy framework. Nominal rigidities have important implications for adjustment dynamics in our model. In the case of a "point-for-point" reform, for example, price stickiness implies that the international dynamics of output is reversed compared to a revenue neutral reform.
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| ISBN | 9781475555608
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