[It is found that the welfare gain per unit of revenue raised is maximized for an export tariff on technology transfer, followed by an import tariff on goods, with an export tariff on goods the poorest policy alternative. These results are derived within a monopolistic competition model, where the production of any good requires some initial research and development (R&D), and technology transfer occurs when R&D is done in one country for production of goods in the other. An intuitive explanation is presented, based on the public-good nature of R&D and also the elasticity of demand for technologies from firms.]

This paper examines the marginal efficiency cost of various factor taxes in a dynamic general-equilibrium model. The au thor solves for the excess burden of anticipated and unanticipated, t emporary and permanent, tax policies. Using a range of estimates for taste and technology parameters, he finds excess burdens larger than those indicated by previous studies that use static models. These exc ess burdens are sensitive to parameter values and timing. However, th e rankings of alternative tax policies turn out to be insensitive to structural parameter values.

It is found that the welfare gain per unit of revenue raised is maximized for an export tariff on technology transfer, followed by an import tariff on goods, with an export tariff on goods the poorest policy alternative. These results are derived within a monopolistic competition model, where the production of any good requires some initial research and development (R&D), and technology transfer occurs when R&D is done in one country for production of goods in the other. An intuitive explanation is presented, based on the public-good nature of R&D and also the elasticity of demand for technologies from firms.