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Effects of Tariffication: Tariffs, Quotas and VERs under Monopolistic Competition

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Author Info
Jan G. Jorgensen
Philipp J. H. Schröder

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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 general equilibrium model with monopolistic competition to examine the welfare effects of tariffication. The ranking of pre- and post-tariffication welfare depends crucially on the nature of the initial trade barrier and the tariff tool applied. Tariffication using a specific (an ad valorem) tariff results in the same (a reduced) welfare level compared to an initial quota, whereas welfare is increased (the same) compared to an initial VER.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.38578.de/dp269.pdf
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Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 269.

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Length: 25 p.
Date of creation: 2002
Date of revision:
Handle: RePEc:diw:diwwpp:dp269

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Related research
Keywords: Trade policy; tariffication; specific tariff; ad valorem tariff; quota; VER;

Find related papers by JEL classification:
F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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  1. Anderson, J-E, 1997. "Revenue Neutral Trade Reform With Many Households, Quotas and Tariffs," Papers 626, Stockholm - International Economic Studies.
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  2. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December. [Downloadable!] (restricted)
  3. Nguyen, T. & Perroni, C. & Wigle, R., 1993. "An Evaluation of the Final Act of the Uruguay Round," Working Papers 93003, Wilfrid Laurier University, Department of Economics.
  4. 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. [Downloadable!] (restricted)
  5. Nguyen, T. & Perroni, C. & Wigle, R., 1993. "An Evaluation of the Final Act of the Uruguay Round," Working Papers 93003, Wilfrid Laurier University, Department of Economics.
  6. Lockwood, Ben & Wong, Kar-yiu, 2000. "Specific and ad valorem tariffs are not equivalent in trade wars," Journal of International Economics, Elsevier, vol. 52(1), pages 183-195, October. [Downloadable!] (restricted)
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  7. Kaempfer, William H & Marks, Stephen V, 1994. "The Possibility of Inefficient Liberalization through Tariffication," Review of International Economics, Blackwell Publishing, vol. 2(2), pages 123-30, June.
  8. Kowalczyk, Carsten & Skeath, Susan E., 1994. "Pareto ranking optimal tariffs under foreign monopoly," Economics Letters, Elsevier, vol. 45(3), pages 355-359. [Downloadable!] (restricted)
  9. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Blackwell Publishing, vol. 43(2), pages 217-35, June. [Downloadable!] (restricted)
  10. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October. [Downloadable!] (restricted)
  11. Lawrence, Robert Z, 1989. "Protection: Is There a Better Way?," American Economic Review, American Economic Association, vol. 79(2), pages 118-22, May. [Downloadable!] (restricted)
  12. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  13. 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. [Downloadable!] (restricted)
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This page was last updated on 2009-11-28.


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