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Administrative Delays as Barriers to Trade

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  • Regibeau Pierre M

    ()
    (University of Essex and CEPR)

  • Rockett Katharine E

    ()
    (University of Essex, University of Tromso and CEPR)

Abstract

We 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 Info

Article provided by De Gruyter in its journal The B.E. Journal of Economic Analysis & Policy.

Volume (Year): 5 (2006)
Issue (Month): 1 (September)
Pages: 1-47

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Handle: RePEc:bpj:bejeap:v:contributions.5:y:2006:i:1:n:27

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  1. Miyagiwa, K. & Ohno, Y., 1993. "Closing the Technology Gap Under Protection," Discussion Papers in Economics at the University of Washington, Department of Economics at the University of Washington 93-09, Department of Economics at the University of Washington.
  2. Prokop, Jacek & Regibeau, Pierre & Rockett, Katharine, 2010. "Minimum quality standards and novelty requirements in a one-short development race," Economics - The Open-Access, Open-Assessment E-Journal, Kiel Institute for the World Economy, vol. 4(15), pages 1-49.
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Cited by:
  1. Zaki, Chahir, 2010. "Towards an explicit modeling of trade facilitation in CGE models: evidence from Egypt," MPRA Paper 23353, University Library of Munich, Germany, revised 14 Jun 2010.
  2. Antoni Estevadeordal & Matthew Shearer & Kati Suominen, 2009. "Market Access Provisions in Regional Trade Agreement," IDB Publications 9311, Inter-American Development Bank.
  3. Bagai, Shweta & Wilson, John S., 2006. "The data chase : what's out there on trade costs and nontariff barriers ?," Policy Research Working Paper Series 3899, The World Bank.

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