The Optimal Degree of Reciprocity in Tariff Reduction
AbstractThis article clari es the roles played by trade policy, in contrast with iceberg transport cost, in the popular setting of Melitz (2003), and characterizes the optimal reciprocal trade policy in such a setting. I show that import tariffs and iceberg transport cost are not equivalent in the strength of their trade- restricting effects and their welfare implications. With all the conflicting effectsof import tariffs on welfare considered, the optimal degree of reciprocity in multilateral tariff reduction turns out to be free trade.
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Bibliographic InfoPaper provided by Singapore Management University, School of Economics in its series Working Papers with number 32-2010.
Length: 13 pages
Date of creation: Dec 2010
Date of revision:
Publication status: Published in SMU Economics and Statistics Working Paper Series
Find related papers by JEL classification:
- 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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- Demidova, Svetlana & Rodríguez-Clare, Andrés, 2009.
"Trade policy under firm-level heterogeneity in a small economy,"
Journal of International Economics,
Elsevier, vol. 78(1), pages 100-112, June.
- Svetlana Demidova & Andrés Rodríguez-Clare, 2007. "Trade Policy under Firm-Level Heterogeneity in a Small Economy," NBER Working Papers 13688, National Bureau of Economic Research, Inc.
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