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Welfare versus market access: The implications of tariff structure for tariff reform

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  • Anderson, James E.
  • Neary, J. Peter

Abstract

We show that the effects of tariff changes on welfare and import volume can be fully characterised by their effects on the generalised mean and variance of the tariff distribution. Using these tools, we derive new results for welfare- and market-access-improving tariff changes, which imply two "cones of liberalisation" in price space. Because welfare is negatively but import volume positively related to the generalised variance, the cones do not intersect, which poses a dilemma for trade policy reform. Finally, we show that generalised and trade-weighted moments are mutually proportional when the trade expenditure function is CES.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 71 (2007)
Issue (Month): 1 (March)
Pages: 187-205

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Handle: RePEc:eee:inecon:v:71:y:2007:i:1:p:187-205

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Web page: http://www.elsevier.com/locate/inca/505552

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  1. Anderson, James E & Neary, J Peter, 1996. "A New Approach to Evaluating Trade Policy," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 63(1), pages 107-25, January.
  2. Francois, Joseph F. & Martin, Will, 2004. "Commercial policy variability, bindings, and market access," European Economic Review, Elsevier, vol. 48(3), pages 665-679, June.
  3. James Anderson & J. Peter Neary, 1998. "The mercantilist index of trade policy," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20242, London School of Economics and Political Science, LSE Library.
  4. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
  5. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, American Economic Association, vol. 89(1), pages 215-248, March.
  6. Feenstra, R.C., 1995. "Estimating the Effects of Trade Policy," Papers, California Davis - Institute of Governmental Affairs 95-10, California Davis - Institute of Governmental Affairs.
  7. Anderson, James E., 1992. "Tariff index theory," Policy Research Working Paper Series 1023, The World Bank.
  8. Neary, J. P., 1997. "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries," Papers, College Dublin, Department of Political Economy- 97/26, College Dublin, Department of Political Economy-.
  9. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 44(1), pages 1-21, February.
  10. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, Econometric Society, vol. 38(2), pages 281-97, March.
  11. Ju, Jiandong & Krishna, Kala, 2000. "Welfare and market access effects of piecemeal tariff reform," Journal of International Economics, Elsevier, Elsevier, vol. 51(2), pages 305-316, August.
  12. Neary, J Peter, 1995. "Trade Liberalisation and Shadow Prices in the Presence of Tariffs and Quotas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 531-54, August.
  13. Bruno, Michael, 1972. "Market Distortions and Gradual Reform," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 39(3), pages 373-83, July.
  14. Joseph Francois & Will Martin, 2002. "Formula Approaches for Market Access Negotiations," Tinbergen Institute Discussion Papers 02-125/2, Tinbergen Institute.
  15. Diewert, W E & Turunen-Red, A H & Woodland, A D, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 56(2), pages 199-215, April.
  16. Fukushima, Takashi, 1979. "Tariff Structure, Nontraded Goods and Theory of Piecemeal Policy Recommendations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 427-35, June.
  17. Rod Falvey, 1994. "Revenue enhancing tariff reform," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 130(1), pages 175-190, March.
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