Takumi Naito

Revenue-Neutral Environmental Tariff Reform, Growth, and Welfare

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.

Revenue-neutral tariff reform and growth in a small open economy

Abstract Formulating a two-final-good, two-input, small open endogenous growth model, we analyze the growth effect of revenue-neutral tariff reform. We find that the growth effect of tariff reform depends on the pattern of trade and the elasticities of substitution between inputs and between consumption of final goods. When the economy specializes in the capital good, the revenue-neutral substitution of a tariff on the imported final good for a tariff on the foreign intermediate good always raises the growth rate. However, when the economy specializes in the consumption good, the revenue-neutral tariff reform may raise or lower the growth rate.

Aid for Trade and Welfare

A new foreign aid initiative called Aid for Trade is intended to improve a recipients trade‐related infrastructure which lowers its trade costs. We formulate a two‐country, continuum‐good Ricardian model, where each countrys transport cost is inversely related to its effective public services which are subject to congestion. Our numerical experiments show that an increase in the donors aid/GDP ratio within a certain range raises welfare in both countries if the recipients relative income tax rate is sufficiently small.

Aid, Non-Traded Goods, and Growth

We examine the effects of foreign aid in a small recipient country with two traded goods, one non-traded good, and two factors. Learning by doing and intersectoral knowledge spillovers contribute to endogenous growth. We obtain two main results. First, a permanent increase in untied aid raises (or lowers) the growth rate if and only if the non-traded good is more capital intensive (or effective labour intensive) than the operating traded good. Second, a permanent increase in untied aid raises welfare if the non-traded good is more capital intensive than the operating traded good; otherwise, it may raise or lower welfare.

Tariff Revenue, Government Expenditure and Growth in a Small Open Economy

I develop a small open endogenous growth model with domestic and foreign intermediate goods. The Marshallian external economies in the domestic intermediate goods sector work as the engine of sustained growth. The model offers two arguments. First, imposing a trade distortion is growth- and welfare-improving if the government uses the tariff revenue for correcting the domestic distortion. Second, comparing the tariff with a lump-sum tax as a financing device, the former is certainly worse than the latter with respect to both growth and welfare if the two intermediate goods are substitutes.

A Rationale for Infant-Industry Protection and Gradual Trade Liberalization

A two-final-good, one-primary-factor, small open endogenous growth model is constructed based on R&D. The model yields two steady states with different growth rates as potential equilibria. Depending on history and the external environment, the economy may fall into the poverty trap in free trade. However, a temporary trade policy can release the economy from the poverty trap. Moreover, the optimal trade policy is gradual trade liberalization with the rate of protection kept to a minimum. Copyright 2000 by Blackwell Publishing Ltd