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Real Versus Tariff Liberalization: A Welfare Comparison Under Monopolistic Competition

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  • Philipp J.H. Schroeder

Abstract

A distinction between real trade costs (e.g., administration, border formalities, transport costs) and tariff costs is introduced into a standard monopolistic competition trade model. Driven by the number of firms, welfare under real trade barriers turns out to be lower than under an equivalent tariff barrier. Based on this finding, the paper shows that integration or rather liberalization measures (generating a certain increase in world trade) that reduce real trade barriers generate a larger welfare gain than integration consisting of a reduction in tariffs.

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  • Philipp J.H. Schroeder, 2004. "Real Versus Tariff Liberalization: A Welfare Comparison Under Monopolistic Competition," Open Economies Review, Springer, vol. 15(4), pages 403-418, October.
    • Handle: RePEc:kap:openec:v:15:y:2004:i:4:p:403-418
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    Cited by:

    1. Jørgensen, Jan G. & Schröder, Philipp J.H., 2008. "Fixed export cost heterogeneity, trade and welfare," European Economic Review, Elsevier, vol. 52(7), pages 1256-1274, October.
    2. Philipp J. H. Schröder & Allan Sørensen, 2014. "A Welfare Ranking of Multilateral Reductions in Real and Tariff Trade Barriers when Firms are Heterogenous," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 423-443, August.
    3. Jørgensen Jan Guldager & Schröder Philipp J. H., 2006. "Tariffs and Firm-Level Heterogeneous Fixed Export Costs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 5(1), pages 1-17, July.
    4. Masafumi Tsubuku, 2016. "Endogenous transport costs and firm agglomeration in new trade theory," Papers in Regional Science, Wiley Blackwell, vol. 95(2), pages 353-362, June.
    5. Lücke Dorothea & Schröder Philipp J.Η. & Schumacher Dieter, 2005. "A Note on R&D and Price Elasticity of Demand," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(6), pages 688-698, December.

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