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Domestic Distortions and International Trade

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Author Info
Anderson, James E
Bannister, Geoffrey J
Neary, J Peter

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Abstract

In this paper, the authors develop techniques for measuring the trade policy equivalent of domestic distortions using a distance function approach. Their measure, the trade restrictiveness index, is shown to equal the uniform tariff that is welfare equivalent to a given pattern of domestic taxes and subsidies. The authors extend the index to incorporate taxes in markets for nontraded goods and factors of production and illustrate its operationality with an application to liberalization in Mexican agriculture. They conclude that their index has considerable potential in empirical work and as an aid to trade negotiators. Copyright 1995 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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Publisher Info
Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 36 (1995)
Issue (Month): 1 (February)
Pages: 139-57
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Handle: RePEc:ier:iecrev:v:36:y:1995:i:1:p:139-57

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January. [Downloadable!] (restricted)
  2. Diewert, W. E., 1985. "A dynamic approach to the measurement of waste in an open economy," Journal of International Economics, Elsevier, vol. 19(3-4), pages 213-240, November. [Downloadable!] (restricted)
  3. Lloyd, P. J., 1974. "A more general theory of price distortions in open economies," Journal of International Economics, Elsevier, vol. 4(4), pages 365-386, November. [Downloadable!] (restricted)
  4. Anderson, James E. & Bannister, Geoffrey, 1992. "The trade restrictiveness index : an application to Mexican agriculture," Policy Research Working Paper Series 874, The World Bank. [Downloadable!]
  5. Magee, Stephen P, 1973. "Factor Market Distortions, Production, and Trade: A Survey," Oxford Economic Papers, Oxford University Press, vol. 25(1), pages 1-43, March. [Downloadable!] (restricted)
  6. Falvey, Rodney E., 1988. "Tariffs, quotas and piecemeal policy reform," Journal of International Economics, Elsevier, vol. 25(1-2), pages 177-183, August. [Downloadable!] (restricted)
  7. Anderson, James E. & Neary, J. Peter, 1992. "A new approach to evaluating trade policy," Policy Research Working Paper Series 1022, The World Bank. [Downloadable!]
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  8. Neary, J Peter, 1978. "Dynamic Stability and the Theory of Factor-Market Distortions," American Economic Review, American Economic Association, vol. 68(4), pages 671-82, September. [Downloadable!] (restricted)
  9. 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, vol. 36(3), pages 531-54, August. [Downloadable!] (restricted)
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  10. Bertrand, Trent J & Vanek, Jaroslav, 1971. "The Theory of Tariffs, Taxes, and Subsidies: Some Aspects of the Second Best," American Economic Review, American Economic Association, vol. 61(5), pages 925-31, December. [Downloadable!] (restricted)
  11. Deaton, Angus, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Blackwell Publishing, vol. 46(3), pages 391-405, July. [Downloadable!] (restricted)
  12. Anderson, James E., 1992. "Tariff index theory," Policy Research Working Paper Series 1023, The World Bank. [Downloadable!]
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  13. Jones, Ronald W, 1971. "Distortions in Factor Markets and the General Equilibrium Model of Production," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 437-59, May-June. [Downloadable!] (restricted)
  14. Bruno, Michael, 1972. "Market Distortions and Gradual Reform," Review of Economic Studies, Blackwell Publishing, vol. 39(3), pages 373-83, July. [Downloadable!] (restricted)
  15. Corden, W. Max & Falvey, Rodney E., 1985. "Quotas and the second best," Economics Letters, Elsevier, vol. 18(1), pages 67-70. [Downloadable!] (restricted)
  16. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Blackwell Publishing, vol. 44(1), pages 1-21, February. [Downloadable!] (restricted)
  17. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, vol. 38(2), pages 281-97, March. [Downloadable!] (restricted)
  18. Peter Neary, 1988. "Tariffs, Quotas, and Voluntary Export Restraints with and without Internationally Mobile Capital," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 714-35, November. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006. "Estimating trade restrictiveness indices," Policy Research Working Paper Series 3840, The World Bank. [Downloadable!]
    Other versions:
  2. Christos Pantzios, 2000. "Trade Restrictiveness in the Presence of 'New' Goods," Open Economies Review, Springer, vol. 11(1), pages 93-101, January. [Downloadable!] (restricted)
  3. James E. Anderson & J. Peter Neary, 1999. "The Mercantilist Index of Trade Policy," NBER Working Papers 6870, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. James E. Anderson, 1996. "Effective Protection Redux," NBER Working Papers 5854, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  5. James E. Anderson, 1997. "The Uruguay Round and Welfare in Some Distorted Agricultural Economies," Boston College Working Papers in Economics 360, Boston College Department of Economics. [Downloadable!]
    Other versions:
  6. Robert C. Feenstra, 1995. "Estimating the Effects of Trade Policy," NBER Working Papers 5051, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  7. Salvatici, Luca & Cipollina, Maria, 2006. "Measuring Protection: Mission Impossible?," Working Papers 18876, TRADEAG - Agricultural Trade Agreements. [Downloadable!]
    Other versions:
  8. Salvatici, Luca & Carter, Colin A. & Sumner, Daniel A., 1997. "The Trade Restrictiveness Index: The Potential Contribution To Agricultural Policy Analysis," 1997 Annual meeting, July 27-30, Toronto, Canada 21028, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  9. James Anderson, 1995. "Trade Restrictiveness Benchmarks," Boston College Working Papers in Economics 290., Boston College Department of Economics. [Downloadable!]
    Other versions:
  10. Hans Gersbach & Hans Haller, 2007. "Hierarchical Trade and Endogenous Price Distortions," Economics working paper series 07/72, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich. [Downloadable!]
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