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The Mercantilist Index of Trade Policy

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Author Info

  • James E. Anderson

    (Boston College)

  • J. Peter Neary

    (University College Dublin)

Abstract

We introduce an index of trade policy restrictiveness defined as the uniform tariff which maintains the same trade volume as a given tariff/quota structure. Our index overcomes the problems of the trade-weighted average tariff - it avoids substitution bias, correctly accounts for general equilibrium transfers, and takes import volume rather than welfare as benchmark. Empirical applications to international cross-section and time-series comparisons of trade policy confirm our theoretical results - trade-weighted average tariffs generally underestimate the true height of tariffs as measured by the trade-volume-equivalent index; this in turn always underestimates the welfare-equivalent index.

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File URL: http://www.ucd.ie/economics/research/papers/1998/WP98.13.pdf
File Function: First version, 1998
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 199813.

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Length: 37 pages
Date of creation: 11 Jul 1998
Date of revision:
Handle: RePEc:ucn:wpaper:199813

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Web page: http://www.ucd.ie/economics
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Related research

Keywords: International trade policy; tariffs; quotas; Trade Restrictiveness Index; trade liberalisation;

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References

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  1. Grossman, G.M. & Helpman, E., 1994. "Technology and Trade," Papers 175, Princeton, Woodrow Wilson School - Public and International Affairs.
  2. Anderson, James E & Neary, J Peter, 1998. "The Mercantilist Index of Trade Policy," CEPR Discussion Papers 2044, C.E.P.R. Discussion Papers.
  3. Michael D. Bordo & Barry Eichengreen & Douglas A. Irwin, 1999. "Is Globalization Today Really Different than Globalization a Hunderd Years Ago?," NBER Working Papers 7195, National Bureau of Economic Research, Inc.
  4. J. P. Neary, 1997. "Pitfalls in the theory of international trade policy: concertina reforms of tariffs and subsidies to high technology industries," LSE Research Online Documents on Economics 20341, London School of Economics and Political Science, LSE Library.
  5. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
  6. Anderson, James E & Neary, J Peter, 1993. "Domestic Distortions and International Trade," CEPR Discussion Papers 786, C.E.P.R. Discussion Papers.
  7. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
  8. Pritchett, Lant & Sethi, Geeta, 1993. "Tariff rates, tariff revenue, and tariff reform : some new facts," Policy Research Working Paper Series 1143, The World Bank.
  9. O'Rourke, Kevin H., 1997. "Measuring protection: a cautionary tale," Journal of Development Economics, Elsevier, vol. 53(1), pages 169-183, June.
  10. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
  11. James E. Anderson, 1993. "Tariff Index Theory," Boston College Working Papers in Economics 215, Boston College Department of Economics.
  12. Anderson, James E, 1998. "Trade Restrictiveness Benchmarks," Economic Journal, Royal Economic Society, vol. 108(449), pages 1111-25, July.
  13. David Cox & Richard Harris, 1983. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Working Papers 523, Queen's University, Department of Economics.
  14. Anderson, James E & Neary, J Peter, 1992. "A New Approach to Evaluating Trade Policy," CEPR Discussion Papers 683, C.E.P.R. Discussion Papers.
  15. Randi Boorstein & Robert C. Feenstra, 1987. "Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74," NBER Working Papers 2452, National Bureau of Economic Research, Inc.
  16. Neary, J Peter & Schweinberger, Albert G, 1984. "Factor Content Functions and the Theory of International Trade," CEPR Discussion Papers 3, C.E.P.R. Discussion Papers.
  17. Robert C. Feenstra, 1995. "Estimating the Effects of Trade Policy," NBER Working Papers 5051, National Bureau of Economic Research, Inc.
  18. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 1-21, February.
  19. Aw, Bee Yan & Roberts, Mark J., 1986. "Measuring quality change in quota-constrained import markets: The Case of U.S. Footwear," Journal of International Economics, Elsevier, vol. 21(1-2), pages 45-60, August.
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