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Effects of Tariffication: Tariffs and Quotas under Monopolistic Competition

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  • Jan Jørgensen
  • Philipp Schröder

    ()

Abstract

Recent rounds of GATT and later WTO have advocated widespread tariffication, meaning that existing non-tariff barriers be converted into import equivalent tariffs. From an economic point of view, the effects of such tariffication are not entirely clear. The paper presents a trade model with monopolistic competition to examine the welfare effects of tariffication. The ranking of pre- and post-tariffication welfare crucially depends on the nature of the initial trade barrier and the tariff tool applied. Tariffication using a specific (ad valorem) tariff results in the same (reduced) welfare level compared to an initial sold quota, whereas welfare is increased (the same) compared to an initial shared quota. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11079-007-9025-9
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Bibliographic Info

Article provided by Springer in its journal Open Economies Review.

Volume (Year): 18 (2007)
Issue (Month): 4 (September)
Pages: 479-498

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Handle: RePEc:kap:openec:v:18:y:2007:i:4:p:479-498

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Web page: http://www.springerlink.com/link.asp?id=100323

Related research

Keywords: Trade policy; Tariffication; Specific tariff; Ad valorem tariff; Quota; Tariff rate quotas; VER; F02; F12; F13;

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References

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  1. Sofia Delipalla & Michael Keen, 1991. "The Comparison Between Ad Valorem and Specific Taxation under Imperfect Competition," Working Papers 821, Queen's University, Department of Economics.
  2. Analysis, A Welfare & Das, Satya P. & Donnenfeld, Shabtai, 1987. "Trade policy and its impact on quality of imports," Journal of International Economics, Elsevier, vol. 23(1-2), pages 77-95, August.
  3. Kaempfer, William H & Marks, Stephen V, 1994. "The Possibility of Inefficient Liberalization through Tariffication," Review of International Economics, Wiley Blackwell, vol. 2(2), pages 123-30, June.
  4. Kowalczyk, Carsten & Skeath, Susan E., 1994. "Pareto ranking optimal tariffs under foreign monopoly," Economics Letters, Elsevier, vol. 45(3), pages 355-359.
  5. Kar-yiu Wong & Ben Lockwood, 1997. "Specific and Ad Valorem Tariffs are not Equivalent in Trade Wars," Discussion Papers in Economics at the University of Washington 0081, Department of Economics at the University of Washington.
  6. Schmitt, Nicolas & Yu, Zhihao, 2001. "Economies of scale and the volume of intra-industry trade," Economics Letters, Elsevier, vol. 74(1), pages 127-132, December.
  7. Romer, Paul, 1994. "New goods, old theory, and the welfare costs of trade restrictions," Journal of Development Economics, Elsevier, vol. 43(1), pages 5-38, February.
  8. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789.
  9. Hideki Konishi, 1999. "Tariffs versus Quotas with Strategic Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 71-91, February.
  10. Nguyen, Trien & Perroni, Carlo & Wigle, Randall, 1993. "An Evaluation of the Draft Final Act of the Uruguay Round," Economic Journal, Royal Economic Society, vol. 103(421), pages 1540-49, November.
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Citations

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Cited by:
  1. Christophe Gouel & Cristina Mitaritonna & Maria Priscila Ramos, 2010. "The Art of Exceptions: Sensitive Products in the Doha Negotiations," Working Papers 2010-20, CEPII research center.
  2. Susanne Dröge & Philipp Schröder, 2009. "The welfare comparison of corrective ad valorem and unit taxes under monopolistic competition," International Tax and Public Finance, Springer, vol. 16(2), pages 164-175, April.

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