Trade Reform with a Government Budget Constraint

James Anderson

No 348., Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: The theory of trade reform typically is based on a passive government budget constraint, in which changes in tariff revenue are costlessly offset by lump sum transfers. This paper offers a general framework for trade reform when the government budget constraint is active, such that tariff revenue cuts must be offset by public good decreases or other tax increases. The trade reform and public finance literatures are integrated to develop some useful and simple new expressions characterizing welfare improving trade reform. The expressions are operational with Computable General Equilibrium models. The theoretical analysis and an application to Korean data in 1963 cast doubt of the desirability of tariff cuts in convex competitive economies with active government budget constraints.

Keywords: Marginal cost of funds; trade reform (search for similar items in EconPapers)
JEL-codes: F1 H2 (search for similar items in EconPapers)
Pages: 31 pages
Date: 1997-01-01
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Citations: View citations in EconPapers (11)

Published in Trade Policy and the Pacific Rim, J. Piggott and A. Woodland, eds., Macmillan for the International Economic Association, 1999.

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Related works:
Chapter: Trade Reform with a Government Budget Constraint (1999)
Working Paper: Trade Reform with a Government Budget Constraint (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:348

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