Working Paper: NBER ID: w23427
Authors: Arnaud Costinot; Iván Werning
Abstract: The Lerner Symmetry Theorem (Lerner, 1936) establishes the equivalence between import tariffs and export taxes in a simple neoclassical economy with two countries, two final goods, and no trade costs. In this paper we provide a number of generalizations and qualifications of this well-known result. Among other things, we show that the absence of trade deficits is neither necessary nor sufficient for Lerner Symmetry to hold. We conclude by discussing its implications for border tax adjustments.
Keywords: No keywords provided
JEL Codes: F1; F10; F11; F12; F13; F23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Lerner Symmetry Theorem establishes equivalence between import tariffs and export taxes (F14) | tax neutrality (H29) |
| absence of trade deficits is neither necessary nor sufficient for Lerner symmetry to hold (F11) | tax neutrality (H29) |
| three sufficient conditions (a1, a2, a3) for tax neutrality (H21) | tax neutrality (H29) |
| production possibilities in a country must be independent of other countries (a1) (F00) | tax neutrality (H29) |
| households must not consume or employ abroad (a2) (D10) | tax neutrality (H29) |
| net value of foreign assets held in the country must be zero (a3) (F21) | tax neutrality (H29) |
| cross-border taxes and local taxes satisfy specific criteria (F55) | tax neutrality (H29) |
| generalization of the Lerner symmetry theorem can hold in economies with market power, behavioral biases, nonlinear taxes, and price stickiness (D10) | robustness of results to various economic environments (C51) |