Tariffication of a Distorted Economy: A CGE Analysis |
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Authors: | William H. Kaempfer,Martin T. Ross,& Thomas F. Rutherford |
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Affiliation: | University of Colorado at Boulder, Boulder, CO 80309, USA |
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Abstract: | This paper examines the consequences of the tariffication of a quota when there are several potential distortions present in a country, including domestic monopoly and wage rigidities. It is generally presumed that tariffs are superior to quotas because of their transparency and revenue-raising attributes. However, in the presence of multiple distortions, liberalization of a single policy instrument may result in net welfare losses. The findings suggest that, in a general equilibrium context, such a liberalization policy will have ambiguous effects upon aggregate domestic welfare in the country undertaking the tariffication. |
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