Steepest Ascent Tariff Reforms

44 Pages Posted: 27 Sep 2006

See all articles by Pascalis Raimondos

Pascalis Raimondos

Queensland University of Technology - School of Economics and Finance; Copenhagen Business School - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Alan D. Woodland

University of New South Wales

Multiple version iconThere are 2 versions of this paper

Date Written: August 2006

Abstract

This paper introduces the concept of a steepest ascent tariff reform for a small open economy. By construction, it is locally optimal in that it yields the highest gain in utility of any feasible tariff reform vector of the same length. Accordingly, it provides a convenient benchmark for the evaluation of the welfare effectiveness of other well known tariff reform rules, as e.g. the proportional and the concertina rules. We develop the properties of this tariff reform, characterize the sources of the potential welfare gains from tariff reform, use it to establish conditions under which some existing reforms are locally optimal, provide geometric illustrations and compare welfare effectiveness of reforms using numerical examples. Moreover, being a general concept, we apply it to the issue of market access and examine its implications. Overall, the paper's contribution lies in presenting a theoretical concept where the focus is upon the size of welfare gains accruing from tariff reforms rather than simply with the direction of welfare effects that has been the concern of the literature.

Keywords: Steepest ascent tariff reforms, piecemeal tariff policy, welfare, market access, small open economy

JEL Classification: F15

Suggested Citation

Raimondos, Pascalis and Woodland, Alan D., Steepest Ascent Tariff Reforms (August 2006). CEPR Discussion Paper No. 5782, Available at SSRN: https://ssrn.com/abstract=933126

Pascalis Raimondos (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Copenhagen Business School - Department of Economics ( email )

Solbjergs Plads 3
DK-2000 Frederiksberg C
Denmark
+45 38 152 594 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Alan D. Woodland

University of New South Wales ( email )

School of Economics
Sydney, NSW 2052
Australia
61293859707 (Phone)
61293136337 (Fax)

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