Income Distributional Impacts of Trade Policies in a Multi-Market Framework: A Case in Pakistan
Abstract
The impacts of using export taxes as a price control in a multi-market framework are
explored using the cotton and yarn sectors in Pakistan as examples. Results show that the
export tax on cotton increased domestic consumption and decreased exports of cotton in
Pakistan, transferring income from cotton producers to yarn spinners and the government.
There was a social loss to Pakistan in the cotton sector. The export tax on cotton increased
domestic yarn production, consumption, exports, and incomes of yarn spinners, but resulted
in a large transfer (social loss) out of the yarn sector.