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Welfare versus Market Access - The Implications of Tariff Structure for Tariff Reform

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Author Info

  • James E Anderson

    (Boston College)

  • J Peter Neary

    (University College Dublin)

Abstract

We show that the effects of tariff changes on welfare and import volume can be fully characterised by their effects on the generalised mean and variance of the tariff distribution. Using these tools, we derive new results for welfare- and market-access-improving tariff changes, which imply two "cones of liberalisation" in price space. Because welfare is negatively but import volume positively related to the generalised variance, the cones do not intersect, which poses a dilemma for trade policy reform. Finally, we show that generalised and trade-weighted moments are mutually proportional when the trade expenditure function is CES.

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File URL: http://www.ucd.ie/economics/research/papers/2004/WP04.23.pdf
File Function: First version, 2004
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Bibliographic Info

Paper provided by School Of Economics, University College Dublin in its series Working Papers with number 200423.

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Length: 47 pages
Date of creation: 17 Aug 2004
Date of revision:
Handle: RePEc:ucn:wpaper:200423

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Related research

Keywords: Concertina rule; Market access; Piecemeal policy reform; Tariff moments; Uniform tariff reductions;

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References

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  1. J Anderson & J.P. Neary, 1998. "The Mercantilist Index of Trade Policy," CEP Discussion Papers dp0413, Centre for Economic Performance, LSE.
  2. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 1-21, February.
  3. Robert C. Feenstra, 1995. "Estimating the Effects of Trade Policy," NBER Working Papers 5051, National Bureau of Economic Research, Inc.
  4. Neary, J Peter, 1998. " Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 187-206, March.
  5. Hiau Looi Kee & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import demand elasticities and trade distortions," Policy Research Working Paper Series 3452, The World Bank.
  6. Joseph Francois & Will Martin, 2002. "Formula Approaches for Market Access Negotiations," Tinbergen Institute Discussion Papers 02-125/2, Tinbergen Institute.
  7. J Anderson & J.P. Neary, 1993. "A New Approach to Evaluating Trade Policy," CEP Discussion Papers dp0173, Centre for Economic Performance, LSE.
  8. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  9. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, vol. 38(2), pages 281-97, March.
  10. Diewert, W E & Turunen-Red, A H & Woodland, A D, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Wiley Blackwell, vol. 56(2), pages 199-215, April.
  11. Neary, J Peter, 1989. "Trade Liberalization and Shadow Prices in the Presence of Tariffs and Quotas," CEPR Discussion Papers 345, C.E.P.R. Discussion Papers.
  12. Joseph Francois & Will Martin, 2002. "Commercial Policy Variability, Bindings, and Market Access," International Trade 0210002, EconWPA.
  13. Ju, Jiandong & Krishna, Kala, 2000. "Welfare and market access effects of piecemeal tariff reform," Journal of International Economics, Elsevier, vol. 51(2), pages 305-316, August.
  14. Anderson, James E., 1992. "Tariff index theory," Policy Research Working Paper Series 1023, The World Bank.
  15. Rod Falvey, 1994. "Revenue enhancing tariff reform," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(1), pages 175-190, March.
  16. Fukushima, Takashi, 1979. "Tariff Structure, Nontraded Goods and Theory of Piecemeal Policy Recommendations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 427-35, June.
  17. Bruno, Michael, 1972. "Market Distortions and Gradual Reform," Review of Economic Studies, Wiley Blackwell, vol. 39(3), pages 373-83, July.
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