Steepest Ascent Tariff Reform

Research output: Contribution to journalJournal articleResearchpeer-review

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.
Original languageEnglish
JournalEconomic Theory
Volume55
Issue number1
Pages (from-to)69-99
Number of pages32
ISSN0938-2259
DOIs
Publication statusPublished - Jan 2014

Cite this

Raimondos-Møller, Pascalis ; Woodland, Alan. / Steepest Ascent Tariff Reform. In: Economic Theory. 2014 ; Vol. 55, No. 1. pp. 69-99.
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Steepest Ascent Tariff Reform. / Raimondos-Møller, Pascalis; Woodland, Alan.

In: Economic Theory, Vol. 55, No. 1, 01.2014, p. 69-99.

Research output: Contribution to journalJournal articleResearchpeer-review

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