Administrative Delays as Barriers to Trade
AbstractWe study a two-country model where two firms, one domestic and the other foreign, must decide when to introduce their new product into a market. The home government may apply an import tariff, an administrative delay, or both to the product of the foreign firm. An administrative delay imposes a waiting period between the time when the quality of the foreign product is determined and the time when the product can actually be sold. Our main interest is the differential effect of the tariff and the administrative delay on the timing of new product introductions and the resulting change in home, foreign and world welfare. We show that administrative delays are less efficient instruments for maximizing home welfare than tariffs. With a tariff, the home government can affect the timing of entry to ensure that the domestic firm moves first at the socially optimal date. Although an optimally chosen delay can achieve the same pattern of introduction, it does not yield any tariff revenues. As a result, if the tariff may be set optimally, administrative delays are not used in a discriminatory manner. If trade liberalization constrains the import tariff to be below its domestically optimal level, discriminatory administrative delays may become part of the optimal policy of the home country. As the optimal delay policy leads to lower levels of world welfare than the optimal tariff, trade liberalization can be welfare decreasing.
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Bibliographic InfoArticle provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.
Volume (Year): 5 (2006)
Issue (Month): 1 (September)
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Web page: http://www.degruyter.com
Other versions of this item:
- P. Regibeau & K. Rockett, 2003. "Administrative Delays as Barriers to Trade," Economics Discussion Papers, University of Essex, Department of Economics 557, University of Essex, Department of Economics.
- RÃ©gibeau, Pierre & Rockett, Katharine, 2001. "Administrative Delays as Barriers to Trade," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3007, C.E.P.R. Discussion Papers.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
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