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Using the gravity model to estimate the costs of protection

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  • Howard J. Wall

Abstract

Many economists expend a lot of energy decrying trade protectionism; nonetheless, their estimates of the actual burden that protectionism imposes on the economy have been surprisingly small. In this article, Howard J. Wall presents a method that captures some of the effects and distortions of trade protection which have not been captured by existing methods. Wall finds that during 1996, worldwide protectionism reduced U.S. exports by 26.2 percent. Likewise, U.S. protectionism decreased U.S. imports from non-NAFTA countries by 15.4 percent. He calculates further that the welfare cost of U.S. protectionism amounted to about 1.45 percent of U.S. national income, which is much higher than previous estimates.

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Bibliographic Info

Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (1999)
Issue (Month): Jan ()
Pages: 33-40

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Handle: RePEc:fip:fedlrv:y:1999:i:jan:p:33-40:n:1

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Related research

Keywords: Free trade ; International trade ; Import quotas ; Export controls;

References

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  1. Tamim Bayoumi & Barry Eichengreen, 1997. "Is Regionalism Simply a Diversion? Evidence from the Evolution of the EC and EFTA," NBER Chapters, in: Regionalism versus Multilateral Trade Arrangements, NBER-EASE Volume 6, pages 141-168 National Bureau of Economic Research, Inc.
  2. I-Hui Cheng & Howard J. Wall, 2004. "Controlling for heterogeneity in gravity models of trade and integration," Working Papers 1999-010, Federal Reserve Bank of St. Louis.
  3. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
  4. Robert C. Feenstra, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 159-178, Summer.
  5. Robert Staiger & Frank Wolak, 1994. "Measuring Industry Specific Protection: Antidumping in the United States," International Trade 9410004, EconWPA.
  6. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
  7. Alan V. Deardorff, 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Working Papers 5377, National Bureau of Economic Research, Inc.
  8. Gary Clyde Hufbauer & Kimberly Ann Elliott, 1994. "Measuring the Costs of Protection in the United States," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 77, July.
  9. Baldwin, Robert E., 1984. "Trade policies in developed countries," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 12, pages 571-619 Elsevier.
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Citations

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Cited by:
  1. Jinhwan Oh & Orgilbold Tumurbaatar, 2011. "Mongolia's International Trade: Impact of Its Geographical Location," Working Papers EMS_2011_02, Research Institute, International University of Japan.
  2. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
  3. Uttam Kumar Deb, 2006. "Rules of Origin and Non-Tariff Barriers in Agricultural Trade: Perspectives from Bangladesh and Cambodia," Working Papers 1206, Asia-Pacific Research and Training Network on Trade (ARTNeT), an initiative of UNESCAP and IDRC, Canada..
  4. Vêlayoudom Marimoutou & Denis Peguin & Anne Peguin-Feissolle, 2009. "The "distance-varying" gravity model in international economics: is the distance an obstacle to trade?," Post-Print hal-00389570, HAL.
  5. Bou�t, Antoine, 2006. "What can the poor expect from trade liberalization?: opening the "black box" of trade modeling," MTID discussion papers 93, International Food Policy Research Institute (IFPRI).
  6. Kiyong Keum, 2010. "Tourism flows and trade theory: a panel data analysis with the gravity model," The Annals of Regional Science, Springer, vol. 44(3), pages 541-557, June.
  7. Philipp Maier, 2008. "A Wave of Protectionism? An Analysis of Economic and Political Considerations," Working Papers 08-2, Bank of Canada.
  8. Nouve, Kofi & Staatz, John M., 2003. "The African Growth And Opportunity Act And The Latent Agricultural Export Response In Sub-Saharan Africa," 2003 Annual meeting, July 27-30, Montreal, Canada 21917, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Craig Depken, 2004. "Market structure and ad valorem taxes: cross-country evidence from the magazine industry," Applied Economics Letters, Taylor & Francis Journals, vol. 11(8), pages 477-481.
  10. Rault, Christophe & Sova, Robert & Sova, Anamaria, 2007. "The Role of Association Agreements within European Union Enlargement to Central and Eastern European Countries," IZA Discussion Papers 2769, Institute for the Study of Labor (IZA).
  11. Bernhard Herz & Marco Wagner, 2008. "Exportweltmeister Deutschland - ein Sommermärchen?," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 9(4), pages 446-464, November.
  12. José V. Blanes & Juliette Milgram Baleix, 2006. "The Free Trade Agreement Morocco-EU: a simulation of the impact on EU exports," ThE Papers 06/09, Department of Economic Theory and Economic History of the University of Granada..
  13. Nouve, Kofi & Staatz, John M., 2003. "Has Agoa Increased Agricultural Exports From Sub-Saharan Africa To The United States?," Staff Papers 11573, Michigan State University, Department of Agricultural, Food, and Resource Economics.
  14. Kramb, Marc Christopher & Herrmann, Roland, 2009. "Wie wirken gemeldete SPS-Maßnahmen? Ein Gravitationsmodell des EU-Rindfleischhandels," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 58(4).
  15. Brox, James A., 2003. "The impact of free trade with the United States on the pattern of Canadian consumer spending and savings," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 69-87, March.
  16. Kyoji Fukao & Goushi Kataoka & Arata Kuno, 2003. "How to Measure Non-tariff Barriers? A Critical Examination of the Price-Differential Approach," Hi-Stat Discussion Paper Series d03-08, Institute of Economic Research, Hitotsubashi University.
  17. Cave, Lisa A. & Blomquist, Glenn C., 2008. "Environmental policy in the European Union: Fostering the development of pollution havens?," Ecological Economics, Elsevier, vol. 65(2), pages 253-261, April.
  18. Bouet, Antoine, 2008. "The expected benefits of trade liberalization for world income and development: Opening the “black box” of global trade modeling," Food policy reviews 8, International Food Policy Research Institute (IFPRI).
  19. José Vicente Blanes Cristóbal & Juliette Milgram Baleix, 2006. "Impacto de la liberalización comercial de Marruecos y de la inmigración marroquí sobre las exportaciones de las CCAA españolas hacia Marruecos," Economic Working Papers at Centro de Estudios Andaluces E2006/14, Centro de Estudios Andaluces.

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