WELFARE ANALYSIS OF TARIFF CHANGE WITH AND WITHOUT INTERNATIONAL TRANSFERS

We derive necessary-sufficient conditions for the existence of a stric tly Pareto-improving tariff reform both with and without changes in in ternational lump-sum transfer of income, in a many-commidity, many-cou ntry framework. Then we show that these conditions are equivalent: if a tariff reform with appropriate changes in transfers attains a strict Pareto improvement, then there exists another tariff reform that atta ins a strict Pareto improvement without such transfers. In the course of this investigation, we find that the 'Rank Condition' plays an esse ntial role and also has some interesting economic implications.