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Political-Economy Arguments for a Uniform Tariff

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  • Arvind Panagariya
  • Dani Rodrik

Abstract

Uniform tariffs have become increasingly popular in recent years, yet their economic rationale is not strong. We identify and evaluate three sets of reasons as to why governments may prefer tariff uniformity as a means of alleviating political motives for excessive protection. First, a free-rider effect may be conducive to less lobbying under a uniform tariff regime than under a regime in which tariffs are allowed to differ. Second, an input-price effect may dampen the enthusiasm of final-goods producers for import protection. Third, a precommitment effect may increase the cost to a future government of protecting favored sectors. None of these arguments provides an unambiguous, airtight case for tariff uniformity. The decision on uniformity has to be made on a case-by-case basis.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3661.

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Date of creation: Mar 1991
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Publication status: published as International Economic Review, August 1993
Handle: RePEc:nbr:nberwo:3661

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  1. W. M. Corden, 1958. "Import Restrictions And Triffs:A New Look At Australian Policy," The Economic Record, The Economic Society of Australia, vol. 34(69), pages 331-346, December.
  2. Balassa, Bela, 1989. "Tariff policy and taxation in developing countries," Policy Research Working Paper Series 281, The World Bank.
  3. Panagariya, Arvind, 1992. "Input tariffs, duty drawbacks, and tariff reforms," Journal of International Economics, Elsevier, vol. 32(1-2), pages 131-147, February.
  4. Bhagwati, Jagdish N, 1982. "Directly Unproductive, Profit-seeking (DUP) Activities," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 988-1002, October.
  5. Panagariya, Arvind, 1990. "How should tariffs be structured?," Policy Research Working Paper Series 353, The World Bank.
  6. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  7. Rodrik, Dani, 1986. "Tariffs, subsidies, and welfare with endogenous policy," Journal of International Economics, Elsevier, vol. 21(3-4), pages 285-299, November.
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