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Welfare effects of unilateral changes in tariffs: the case of Motor vehicles and parts in Australia

Dixon, Peter and Rimmer, Maureen T (2008) Welfare effects of unilateral changes in tariffs: the case of Motor vehicles and parts in Australia. Working Paper. Centre of Policy Studies.

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Abstract

We derive formulas for the optimal tariff rate in four theoretical models. We start with a model in which industries are competitive and then successively allow for: monopoly pricing by export industries; revenue-replacement costs; and cold-shower effects. The theoretical formulas accurately explain results from MONASH, a detailed CGE model. A critical parameter in determining the optimal tariff is the export-demand elasticity. Modellers are often reluctant to adopt empirically justifiable values for export-demand elasticities because such values generate embarrassingly large optimal tariff rates. A way out of this dilemma is the adoption of a non-linear cold-shower specification.

Item Type: Monograph (Working Paper)
ISBN: 0732615844
Additional Information:

CoPS/IMPACT Working Paper Number G-177

Uncontrolled Keywords: F13; F14; C68; optimal tariff; export-demand elasticities; cold-shower effect; monopoly pricing; revenue-replacement costs
Subjects: FOR Classification > 1402 Applied Economics
Faculty/School/Research Centre/Department > Centre of Policy Studies (CoPS)
Depositing User: Symplectic Elements
Date Deposited: 31 Aug 2015 07:08
Last Modified: 03 Jun 2019 06:56
URI: http://vuir.vu.edu.au/id/eprint/29408
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