Steepest ascent tariff reform

Raimondos-Møller, Pascalis & Woodland, Alan D. (2014) Steepest ascent tariff reform. Economic Theory, 55(1), pp. 69-99.

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Abstract

The policy reform literature is primarily concerned with the construction of reforms that yield welfare gains. By contrast, this paper’s contribution is to develop a theoretical concept for which the focus is upon the sizes of welfare gains accruing from policy reforms rather than upon their signs. In undertaking this task, and by focusing on tariff reforms, we introduce the concept of a steepest ascent policy reform, which is a locally optimal reform in the sense that it achieves the highest marginal gain in utility of any feasible local reform. We argue that this reform presents itself as a natural benchmark for the evaluation of the welfare effectiveness of other popular tariff reforms such as the proportional tariff reduction and the concertina rules, since it provides the maximal welfare gain of all possible local reforms. We derive properties of the steepest ascent tariff reform, construct an index to measure the relative welfare effectiveness of any given tariff reform, determine conditions under which proportional and concertina reforms are locally optimal and provide illustrative examples.

Impact and interest:

1 citations in Scopus
1 citations in Web of Science®
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ID Code: 94036
Item Type: Journal Article
Refereed: Yes
Keywords: Piecemeal tariff policy, Locally optimal reforms
DOI: 10.1007/s00199-013-0741-7
ISSN: 1432-0479
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Copyright Owner: Copyright 2013 Springer-Verlag Berlin Heidelberg
Deposited On: 23 Mar 2016 05:20
Last Modified: 27 Jun 2017 09:01

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