Trade and Tradability: Exports, Imports, and Factor Markets in the Salter-Swan Model

We extend the Salter-Swan model to include both factor markets and semi-traded goods. In our model, changes in relative factor prices depend on changes in world commodity prices, factor endowments, and the trade balance. In contrast, only changes in world commodity prices can affect factor prices in the neoclassical trade model. The inclusion of semi-traded goods weakens the magnification effect in both the Stolper-Samuelson and Rybczynski theorems. When imports and domestic goods are poor substitutes, a characteristic of some commodities in developing countries, the sign of the Stolper-Samuelson theorem is reversed.     

EXCHANGE RATE PROBLEMS IN NATIONAL ACCOUNTING OF DEVELOPING COUNTRIES*

Developing countries which typically have import surpluses and inflationary pressures because of insufficient savings are prone to use indirect taxes on imports (Tm) and subsidization of exports (Sx) in order to prevent deterioration of the balance of trade. If these substitutes for devaluation are included in the net indirect tax component of product at current market prices (Ym) the import surplus is likely to be understated, and Ym upward biased. This distortion will be avoided if imports and exports are measured at effective exchange rates (ER), that is, at official rates (OR) plus Tm and Sx respectively, and if (Tm - Sx) is deducted from the net indirect tax component of Ym. Only in this manner become imports and exports consistent with the other uses and resources at market prices and can be articulated with them. At base-year prices the volume index of product at OR diverges from that of ER to the degree that the composition of imports and exports in regard to tax and subsidy rates computed ad valorem significantly changes. Such a case is similar to that of the price indexes of imports and exports moving in diverging proportions: the trade balance at base-year prices will differ from that at current prices. The resulting discrepancies in national accounts have led to proposals of deflating, for example, exports by the price index of imports. Suchlike approaches are incompatible with the principle of national accounting that prices are supposed already to measure substitution values. Deflating exports by import prices means reintroducing substitution values, as does, for example, deflation of incomes by a consumer price index. Correspondingly, since the trade balance at ER conceptually expresses the value of imports at domestic market prices as compared to the corresponding domestic market value of exports, and if at ER the trade balance diverges from that at OR, the former balance has an important meaning (as has the trade balance at base-year prices as compared to that at current prices) and the resulting discrepancy between the two measures should not be removed merely for the sake of accounting smoothness. In contrast to the market price approach, the measurement of product at base-year factor cost is indifferent to the measurement of the trade balance at ER and at OR. It is, therefore, proposed in countries in which part of import taxation and export subsidization substitutes for devaluation, to record imports and exports in the national accounts at effective exchange rates, and to correct the net indirect tax component of product correspondingly. Imports and exports at official exchange rates should be shown within the balance of payments, and the latter separately as a memorandum item.     

Trade prices and supply in the UK economy

Current account imbalances are a major source of instability in the world monetary and trading system. Measures to correct these imbalances have largely involved adjustments to exchange rates. In the international trade literature, when the current account is in deficit, the Marshall-Lerner condition is sufficient for a successful devaluation. However, this partial equilibrium condition — apart from being based on the assumption that supply elasticities are infinite — abstracts from how the domestic economy responds to the change in relative prices. In this paper we develop a model of price and output determination in an open economy with imperpectly competitive markets, and draw a distinction between goods which are exported and those which are supplied to the domestic market. This means that we have to determine jointly both export prices and the domestic price of house sales. We show that as long as there is no money illusion in the labour market a fall in the nominal exchange rate raises domestic and export prices proportionally and leaves trade volumes unaffected. However, shifts in domestic absorption relative to overseas demand — by changing relative prices — cause shifts in the relative supply of exports and domestically sold goods and affect the trade balance. Thus fiscal and monetary measures directed towards reducing domestic absorption are more likely to be successful in correcting current account imbalances than exchange rate depreciation.     

资源税计征方式的探讨

随着近几年国际、国内资源价格的过快变动,资源税从量计征的局限性凸显。十八届三中全会提出要加快资源税改革,实行资源有偿使用制度和生态补偿制度。为此,探讨资源税从价计征的改革就显得尤为重要。在对资源税从量定额征收与从价定率征收方式的比较分析后,认为应针对不同资源的供求状况,对于供求状况不稳定、同质产品价格差异较大、计量单位不规范的消费品,按从价定率方式征收;对于供求基本平衡、同质产品价格差异不大、计量单位规范的消费品,按从量定额方式征收。但作为总体趋势,应更多地采用从价税形式的资源税。     

Tax-motivated transfer pricing and US intrafirm trade prices

This paper analyzes monthly data on US international trade prices between 1997 and 1999 in order to investigate the impact of tax influences on intrafirm trade prices. Results indicate that there is substantial evidence of tax-motivated transfer pricing in US intrafirm trade prices. There is a strong and statistically significant relationship between countries’ tax rates and the prices of intrafirm transactions. Controlling for other variables that affect trade prices, as country tax rates are lower, US intrafirm export prices are lower, and US intrafirm import prices are higher. This finding is consistent with theoretical predictions regarding tax-motivated income shifting behavior.     

European Integration and Production in the French Economy

Effects of greater European integration on the French economy are explored with an aggregate cost function. Input direct price elasticities are inelastic, but greatest (absolute value) for capital and lowest for imports. Cross-price elasticities suggest inputs are substitutes and are higher for domestic inputs than domestic input and imports pairs. As trade restrictions fall, effects on domestic input demand may increase as substitution elasticities rise. Inverse output supply price elasticities indicate domestic input prices are relatively important factors affecting consumption goods prices and import prices more important for investment goods. Thus, import price decreases may stimulate investment and growth. (JEL F14 , O10 , O12 )     

Market Access and WTO Border Tax Adjustments for Environmental Excise Taxes under Imperfect Competition

The literature identifies linkages between domestic environmental policies and trade, the treatment of imports being an important issue in administration of domestic environmental excise taxes. With the aim of ensuring foreign exporters do not attain a competitive advantage, border tax adjustments are used. Since most environmental excise taxes apply to intermediate goods, the relevant border tax adjustment applies to final imported goods. However, when both intermediate and final goods markets are oligopolistic, border tax adjustments may be non‐neutral. Moreover, even if market access is unchanged, border tax adjustments can still lead to redistribution of profits between domestic and foreign firms.     

Tariff pass-through and the distributional effects of trade liberalization

This paper estimates the distribution of welfare gains due to the trade reforms in India by simultaneously considering the effect on prices of tradable goods and wages. The cost of consumption for each household is affected by the domestic price changes, while wage incomes adjust to these price changes in equilibrium. Three rounds of the Indian Employment and Consumption Surveys are used for the analysis. The price transmission mechanisms are estimated for both rural and urban areas to understand the extent to which the trade reforms are able to affect the domestic prices. In order to assess the distributional effects, a series of nonparametric local linear regressions are estimated. The findings show that households at all per capita expenditure levels had experienced gains as a result of the trade liberalization, while the average effect was generally pro-poor and varied significantly across the per capita expenditure spectrum.     

Border tax adjustments and tariff‐tax reforms with consumption pollution

We develop a model of a small open economy, where pollution per unit of consumption between domestically produced and imported quantities of the same good differs. We show that the first‐best policy combination calls for consumption taxes on all polluting goods, and border tax adjustment (BTA) measures, that is, tariffs or import subsidies. We identify conditions under which well‐known tariff‐tax reform policies for developing economies, such as a consumer‐price‐neutral piecemeal reform of trade and a consumption tax, and a consumer‐price‐neutral reform of all trade and consumption taxes improve welfare. We also evaluate whether reforms of trade taxes alone are superior to consumer‐price‐neutral reforms of trade and consumption taxes.     

Trade and direct investment in producer services and the domestic market for expertise

Abstract.  Foreign producer services can provide substantial benefits for domestic firms. We build on earlier monopolistic‐competition models of intermediate producer services in this paper. Results show that: (1) while foreign services are partial‐equilibrium substitutes for domestic skilled labour, they may be general‐equilibrium complements, (2) service trade can provide crucial missing inputs that reverse comparative advantage in final goods, (3) the 'optimal' tax on imported services may be a subsidy, and (4) in our dynamic formulation, there may be earnings losses for immobile workers along a transition path that suggest potentially important equity consequences of reform. JEL classification: F12, F16, F23     

Devaluation,pass-through and foreign reserves dynamics in a tourism economy

This paper examines the effects of currency devaluations on goods prices and foreign reserves for a small-open economy with inbound tourism. Tourism transforms non-traded goods into exportable goods. Devaluations yield an over pass-through to the prices of the non-traded tourism goods. This may hurt the trade balance and hence lead to a decline in foreign reserves for the economy.     

NATIONAL PRODUCT AT CONSTANT PRICES IN THE FEDERAL REPUBLIC OF GERMANY

With few exceptions, only cormmodity flows and values which can be determined by means of commodity flows (flows of goods and services) are calculated in constant prices in the official national accounts of the Federal Republic of Germany. Figures an the industrial origin and the final use of the national product are published, the former according to thirty industries, the latter according to the major types of uses of which in particular private consumption expenditure has been further analysed. The computations at constant prices are based on market prices and not on factor costs. It is only on this basis that a uniform valuation of the production and the expenditure side can be made since the turnover tax, which is the most important indirect tax, is contained in the elements of final demand in varying shares and cannot be eliminated (the tax is part of the price and has cumulative effect). The computation at constant prices presupposes a breakdown of the values in current prices according to quantities and prices. This raises a number of problems, e.g. because seller and buyer may consider differing aspects-production costs, technical attributes, etc., on the one hand, and use etc., on the other hand. In part there exist only vague ideas, or no ideas at all, as to what is to be considered-from a theoretical point of view-as quantity and price. In other cases the two values can only with great difficulties, if at all, be quantified, or there exists no market price and only the production costs are available. The author deals in greater detail with differences in quality and new commodities, the determination and treatment of quantities and prices for services, in particular for trade services (services attached to goods), the computation of government services at constant prices considering the development of productivity in public service, the determination of the values calculated as balances, above all the treatment of changes in the terms of trade for net exports of goods and services, the computation of the contributions of industries to the gross domestic product and, finally, the reconciliation of the production and the expenditure side. In a third section the author deals with index formulae and the base year. In the majority of cases values are deflated; partly, however, they are currently adjusted by means of volume and quantity data. On the production side the two methods are in part combined. In a concluding section a survey is provided of the computation methods used in the Federal Republic of Germany and on the available material for the computations. Mention is made of depreciation at constant prices.     

Home bias, distribution services and determinants of real exchange rates

This paper examines empirically how exogenous changes in the terms of trade affect the real exchange rate through the relative price of traded goods with Canada–US data. The relative price of traded goods is constructed using prices at the dock and retail prices. The first measure emphasizes the importance of home bias in consumption of traded goods. The second measure highlights the importance of distribution services required for consumption of traded goods. It is found that terms of trade shocks affect the relative price of traded goods using both measures. A possible interpretation of empirical findings is that home bias and distribution services are important for understanding the relative price of traded goods.     

Trade policy reform and international trade tax revenue in Uganda

This paper contributes to the literature on the relationship between tariff reform and customs tax revenue by explicitly capturing the institutional features of decision making in the econometric modeling. The results show that exchange rate depreciation has had pass through effects to the domestic market price of imports which reduces trade tax revenue to GDP ratio in the long run, though it increases trade tax revenue in the short term. There are also seasonal patterns in the short term trade tax payment. The results point to some scope to harness the benefits associated with trade policy reform without having to worry a lot about its effects on trade (and overall) tax revenue. In fact, it would be possible to realise modest increases in trade tax revenue if the exemption regime were to be reviewed and if there was capacity to contain the disruptive impact of sharp exchange rate depreciations.     

Implications of incorporating domestic margins into analyses of energy taxation and climate change policies

In most applied general equilibrium (AGE) analyses, the domestic transportation, wholesaling, and retailing services that facilitate the flow of goods and services from producers to consumers are not identified by commodity or use. Because the margins on energy commodities can be substantial, ignoring these domestic margins has important consequences when analyzing the impacts of policies designed to limit greenhouse gas emissions. This paper incorporates domestic trade and transport margins into the GTAP-E model, which has previously been used to analyze climate change policies. Models that do not explicitly incorporate domestic margins over-estimate the reduction in CO₂ emissions from a given carbon tax or under-estimate the level of a carbon tax needed to achieve a specific abatement target when domestic margins are fixed or when the carbon tax is treated as a consumption tax with variable domestic margins. However, this result can be reversed when the carbon tax is treated as an output tax with variable domestic margins.     

Real exchange rates,asset prices and terms of trade: A theoretical analysis

This paper develops a continuous-time two-country dynamic equilibrium model, in which the real exchange rates, asset prices, and terms of trade are jointly determined in the presence of nontradable goods. The model determines the relation between the financial markets and real goods markets in the world economy and their responses to various shocks under the home bias assumption. A positive domestic supply shock induces a positive return on the domestic asset markets and a deterioration of terms of trade that improves the foreign output and boosts the foreign asset markets. Demand shocks act in the opposite way. This model also analyses the impact of change in the relative price of nontradable to tradable goods on the terms of trade and asset markets. A higher productivity growth in tradable goods than in nontradable goods leads to a higher relative price of nontradable to tradable goods, which appreciates the real exchange rate, deteriorates the terms of trade, and depresses the domestic and foreign asset markets. A lower relative price of nontradable goods depreciates the real exchange rate, improves the terms of trade, and lifts both the domestic and foreign asset markets.     

Ad‐valorem tax incidence and after‐tax price adjustments: evidence from Brazilian basic basket food

Abstract Recent empirical work on tax incidence suggests that after‐tax price responses are independent of the tax change direction. This paper investigates asymmetric price responses to ad‐valorem tax changes in the Brazilian food market for 10 goods in 16 states during the period 1994–2008. Our results suggest that when tax rates increase, tax full shifting occurs for 2 of the 10 goods and tax overshifting occurs for one of the 10 goods; the price response to tax cuts is an undershifting for all goods. Moreover, this last result is similar to our estimation of (average) tax incidence (undershifting). We also investigate the short‐term and long‐term relationships between prices and VAT rate parameters and find that prices seem to respond to tax shocks within four months.     

Tariff Revenue, Government Expenditure and Growth in a Small Open Economy

I develop a small open endogenous growth model with domestic and foreign intermediate goods. The Marshallian external economies in the domestic intermediate goods sector work as the engine of sustained growth. The model offers two arguments. First, imposing a trade distortion is growth- and welfare-improving if the government uses the tariff revenue for correcting the domestic distortion. Second, comparing the tariff with a lump-sum tax as a financing device, the former is certainly worse than the latter with respect to both growth and welfare if the two intermediate goods are substitutes.
JEL Classification Numbers: F43, H20.     

CUTTING CARBON EMISSIONS AT A PROFIT (PART II): IMPACTS ON U.S. COMPETITIVENESS AND JOBS

This article examines how an integrated least-cost implementation of the Kyoto Protocol in the United States would affect U.S. competitiveness and jobs. Drawing on previous work, the authors analyze integrated emission reduction strategies based on a $50/ton carbon tax (including border tax adjustments), a payroll tax cut, energy-productivity–oriented market reforms, and international flexibility mechanisms. This policy portfolios is compared to conventional approaches that omit market and fiscal reforms.
Input-output data are used to estimate the impact on export prices of goods and services produced in the United States. Similar data are used to translate changes in GDP and energy production into employment impacts in energy and nonenergy sectors. The costs of providing transitional assistance for workers in the coal industry are compared to the GDP benefits of a profitable Kyoto strategy.
The analysis shows that relative to purchasing international emission rights, productivity-raising domestic market, institutional, and fiscal reforms offer much broader advantages for tradE-exposed U.S. industries. Though allowance purchases alone increase export prices of U.S. manufactured goods and services, an integrated no-regrets strategy reduces export prices for the large majority of U.S. industries and limits the impact of climate protection policies on the few most energy-intensive basic materials industries to very small levels. Relative to the baseline, an integrated least-cost implementation of the Kyoto target increases economy-wide employment levels by several hundred thousand jobs in 2010.     

WHY A FREE TRADE AREA? THE TARIFF ALSO RISES*

This paper considers the choice between a customs union (wherein partners share a common external tariff) and a free trade area (wherein each partner chooses its own tariff against non-members). Following the result that a customs union dominates a free trade area, with coordination of domestic tax policies, we show that a free trade area may nevertheless be chosen if tariffs are determined endogenously through industry lobbying. This is so even when the free trade area equates producer prices within its borders and induces tariff revenue competition and whether or not there is domestic free-riding in lobbying.