Working Paper: NBER ID: w19752
Authors: James E. Anderson; J. Peter Neary
Abstract: What kind of tariff reform is likely to raise welfare in situations where tariff revenue is important? Uncertainty about specification and risk from imprecise parameter estimates of any particular specification reduce the credibility of simulation estimates. A promising alternative is to develop rules which are robust with respect to such uncertainty. We present sufficient conditions for a class of linear rules that guarantee welfare-improving tariff reform. The rules span cones of welfare-improving tariff reforms consisting of convex combinations of (i) trade-weighted-average-tariff-preserving dispersion cuts; and (ii) uniform tariff cuts that preserve domestic relative prices among tariff-ridden goods.
Keywords: tariff reform; welfare; trade policy
JEL Codes: F1; F13; H21
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| tariff reforms (F13) | welfare improvements (I38) |
| tariff dispersion (F12) | welfare (I38) |
| tariff dispersion (F12) | revenue (H27) |
| tariff reforms (F13) | revenue neutrality (H29) |
| trade-weighted average tariff-preserving cuts (F13) | welfare improvements (I38) |
| uniform tariff cuts (F13) | welfare improvements (I38) |
| reductions in tariff dispersion (F12) | overall welfare (I31) |
| linear reform rules (C51) | welfare improvements (I38) |
| observability of generalized moments (C13) | formulation of welfare-improving rules (D60) |