Modernisation of service industries and the expansion of international trade have been important elements of the reform process in the Baltic States, aimed at establishing a business-friendly and pro-competitive environment for services in Estonia, Latvia and Lithuania

It is well known that a consumer price-neutral reform of consumption taxes and import tariffs is welfare-improving. This paper shows that such price controls are inferior to quantity controls in terms of welfare improvement. The paper next turns to a comparison of different abatement strategies....