Import tariffs are efficient second-best policy solutions for many developing countries where government revenue is difficult to obtain by other means such as an income or sales tax.

Question

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Import tariffs can serve as a revenue source for developing countries where it may be difficult to implement other types of taxes. However, tariffs may also increase the prices of imported goods and reduce the competitiveness of domestic industries, so they should be carefully evaluated on a case-by-case basis. Overall, tariffs are considered a second-best policy solution because they distort trade and may not address underlying issues such as low productivity or poor governance.

Import Tariffs Are Efficient Second-Best Policy Solutions for Many Developing