Revenue-Neutral Environmental Tariff Reform, Growth, and Welfare |
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Authors: | Takumi Naito |
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Affiliation: | Department of Social Engineering, Tokyo Institute of Technology, 2-12-1 O-okayama, Meguro-ku, Tokyo 152-8552, Japan. E-mail: . |
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Abstract: | This paper analyzes the growth and welfare effects of revenue‐neutral tariff reform in a small open endogenous growth model with environmental externalities. As is the case in countries that depend primarily on imported energy, the employment of a foreign intermediate good causes negative environmental externalities in production. This paper shows that substituting a tariff on the foreign intermediate good for a tariff on the foreign consumption good in a revenue‐neutral way raises the growth rate and the welfare, if the environmental externality is sufficiently strong and if the elasticity of substitution between inputs lies within a certain range. |
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