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Trade Restrictiveness and Deadweight Loss in China¡¯s Imports

Author

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  • Bo Chen

    (School of International Business Administration, Shanghai University of Finance and Economics, Shanghai 200433, China)

  • Hong Ma

    (School of Economics and Management, Tsinghua University, Beijing 100084, China)

Abstract

China is believed to have gained immensely from its admission into to the World Trade Organization (WTO) in 2001. One of the direct gains comes from the lessening of deadweight loss (DWL) due to tariff reduction. Conventional measures for DWL, however, are too aggregate to capture the trade policies, which are determined at a much higher disaggregated level, and ignore the interactions between tariff and corresponding import demand as suggested by theories. In this paper, we first systematically estimate the import demand elasticities at a highly disaggregated level and then match them with the most detailed lines of the applied tariff for the most favored nations as reported by the WTO. Using the detailed matching data, we construct Feenstra¡¯s (1995) simplified trade restrictiveness index (TRI), which captures the covariance of tariff and the corresponding demand elasticity. Finally, we use the TRI to compute the DWL from1997 to 2008 and find that the DWL due to the tariff barrier was reduced to 0.73% of GNI in 2008, noticeably lower than the highest previous mark of 4.58% of GNI in 2001.

Suggested Citation

  • Bo Chen & Hong Ma, 2012. "Trade Restrictiveness and Deadweight Loss in China¡¯s Imports," Frontiers of Economics in China-Selected Publications from Chinese Universities, Higher Education Press, vol. 7(3), pages 478-494, September.
    • Handle: RePEc:fec:journl:v:7:y:2012:i:3:p:478-494
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    File URL: http://journal.hep.com.cn/fec/EN/10.3868/s060-001-012-0021-3
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    Citations

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    Cited by:

    1. Chen, Bo & Ma, Hong & Xu, Yuan, 2014. "Measuring China’s trade liberalization: A generalized measure of trade restrictiveness index," Journal of Comparative Economics, Elsevier, vol. 42(4), pages 994-1006.
    2. Bo Chen & Hong Ma & David S. Jacks, 2017. "Revisiting the Effective Rate of Protection in the Late Stages of Chinese Industrialisation," The World Economy, Wiley Blackwell, vol. 40(2), pages 424-438, February.
    3. Evans, Olaniyi, 2019. "The effects of US-China trade war and Trumponomics," MPRA Paper 93682, University Library of Munich, Germany.

    More about this item

    Keywords

    demand elasticities; non-processing imports; deadweight loss (DWL);
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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