Trade Reform with a Government Budget Constraint

James Anderson

No 5827, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The standard theory of trade reform uses a passive government budget constraint, in which changes in tariff revenue are offset by changes in lump sum transfers. This paper offers a general framework for the analysis of trade reform when the government budget constraint is active, meaning that tariff revenue cuts must be offset by distortionary fiscal policy changes --- public good supply cuts or alternative tax increases. Useful and simple new expressions characterizing welfare improving trade reform compare the Marginal Cost of Funds (MCF) of trade taxes with the MCF of consumption taxes. The MCF expressions provide an intuitive index number which is operational with Computable General Equilibrium models. The theoretical analysis and an application to Korean data in 1963 both cast doubt on the desirability of tariff cuts in convex competitive economies with active government budget constraints.

JEL-codes: F13 H21 (search for similar items in EconPapers)
Date: 1996-11
Note: ITI
References: Add references at CitEc
Citations: View citations in EconPapers (10)

Published as in Trade Policy and the Pacific Rim, J.Piggott and A.Woodland, eds., MacMilan for the IEA, 1999.

Downloads: (external link)
http://www.nber.org/papers/w5827.pdf (application/pdf)

Related works:
Chapter: Trade Reform with a Government Budget Constraint (1999)
Working Paper: Trade Reform with a Government Budget Constraint (1997)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:5827

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w5827

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().