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On Estimating the Static Effects of Preferential Tariffs

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  • Dennis G. Beckmann
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    Abstract

    It is shown that the estimates of trade creation, trade diversion, and the erosion of GSP benefits derived from the well-known methodology of Robert Baldwin and Tracy Murray (1977) are biased for two reasons. First, the estimates neglect an intercommodity substitution and secondly, the estimates are based on free on board values of imports rather than the values actually paid by consumers in the donor country. Acknowledging these biases results in the overestimation of the aforementioned aggregate effects by 9 percent, 57 percent, and 54 percent respectively. The implicit own- and cross-price elasticities of demand of the corrected methodology are also reported.

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    File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume13/V13N4P389_397.pdf
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    Bibliographic Info

    Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

    Volume (Year): 13 (1987)
    Issue (Month): 4 (Oct-Dec)
    Pages: 389-397

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    Handle: RePEc:eej:eeconj:v:13:y:1987:i:4:p:389-397

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    Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
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    Web page: http://www.ramapo.edu/eea/journal.html
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    1. Pomfret, Richard, 1986. "MFN Tariff Reductions and Developing Country Trade Benefits under the GSP: A Comment," Economic Journal, Royal Economic Society, vol. 96(382), pages 534-36, June.
    2. Rousslang, Donald & Parker, Stephen, 1984. "Cross-Price Elasticities of U.S. Import Demand," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 518-23, August.
    3. Baldwin, R E & Murray, Tracy, 1977. "MFN Tariff Reductions and Developing Country Trade Benefits under the GSP," Economic Journal, Royal Economic Society, vol. 87(345), pages 30-46, March.
    4. Ahmad, Jaleel, 1978. "Tokyo Rounds of Trade Negotiations and the Generalised System of Preferences," Economic Journal, Royal Economic Society, vol. 88(350), pages 285-95, June.
    5. Clague, Christopher, 1971. "Tariff Preferences and Separable Utility," American Economic Review, American Economic Association, vol. 61(2), pages 188-94, May.
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    Cited by:
    1. Kara Reynolds, 2005. "The Erosion of Tariff Preferences: The Impact of U.S. Tariff Reductions on Developing Countries," International Trade 0507001, EconWPA.
    2. Dale Truett & Lila Truett, 1993. "Trade preferences and exports of manufactures: A case study of Bolivia and Brazil," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 129(3), pages 573-590, September.

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