A major constraint on trade liberalization in many countries is the prospective loss of government revenue.Recent results, however, have established a simple and appealing strategy for overcoming this difficulty, whilst still realizing the efficiency gains from liberalization, in small, competitive economies: combining tariff cuts with point-for-point increases in destination-based consumption taxes unambiguously increases both national welfare and total government revenue.This note explores the implications of imperfect competition for this strategy.Examples are easily found in which this strategy unambiguously reduces domestic welfare.
|Place of Publication||Tilburg|
|Number of pages||12|
|Publication status||Published - 2004|
|Name||CentER Discussion Paper|
- tax reform
- imperfect competition