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Heterogeneous Effects of Tariff and Non-tariff Trade-Policy Barriers in Quantitative General Equilibrium

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Abstract

Structural quantitative work in international economics typically treats trade policy as log-linearly related to trade costs and as exogenous. This paper proposes a structural approach that allows for a non-parametric relationship and treats tariff and non-tariff trade-policy variables as potentially endogenous in log-linear estimation. We document that the data reject the assumption of log-linearity of trade costs in both the tariff- and the non-tariff-policy domains. Specifically, the partial impact of a change in tariffs is strongest for low policy barriers and medium levels of tariffs but generally decreases in the level of both non-tariff barriers and tariff barriers. To give a relevant illustration, we assess the effects of a unilateral increase of US tariffs on Chinese imports by 10 percentage points and document that the estimated effects on real bilateral trade-flow changes would be largely underestimated by standard approaches.

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  • Egger, Peter & ,, 2019. "Heterogeneous Effects of Tariff and Non-tariff Trade-Policy Barriers in Quantitative General Equilibrium," CEPR Discussion Papers 13602, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:13602
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    More about this item

    Keywords

    Trade policy; Gravity models; Semi-parametric methods; Non-parametric methods; Generalized propensity scores;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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