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Trade restrictions with imported intermediate inputs : when does the trade balance improve?

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Author Info
Lopez, Ramon
Rodrik, Dani

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Abstract

The author's model demonstrates that when imports are predominantly intermediate inputs - as they are in most developing countries - import restrictions can not always be relied upon to improve the trade balance. Such restrictions act as a supply shock to the economy. Unless nontraded goods are intensive users of imported intermediaries, the general equilibrium consequence of import restrictions is a large enough reduction in export supplies to swamp the direct effect of the restrictions. The result is a deterioration of the trade balance.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 174.

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Date of creation: 31 Mar 1989
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Handle: RePEc:wbk:wbrwps:174

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Keywords: Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Trade Policy; Rules of Origin;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Obstfeld, Maurice, 1982. "Aggregate Spending and the Terms of Trade: Is There a Laursen-Metzler Effect?," The Quarterly Journal of Economics, MIT Press, vol. 97(2), pages 251-70, May. [Downloadable!] (restricted)
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  2. Charles Engel & Kenneth Kletzer, 1986. "Tariffs, Saving and the Current Account," NBER Working Papers 1869, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Razin, Assaf & Svensson, Lars E. O., 1983. "Trade taxes and the current account," Economics Letters, Elsevier, vol. 13(1), pages 55-57. [Downloadable!] (restricted)
  4. Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 97-125, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Sajal Lahiri & Anjum Nasim, 2005. "Commercial Policy Reform in Pakistan: Opening up the Economy under Revenue Constraints," International Tax and Public Finance, Springer, vol. 12(6), pages 723-739, November. [Downloadable!] (restricted)
  2. Farida C. Khan, 1994. "Import Liberalization In A Developing Country With Import Intensive Industry: The Case Of Bangladesh," International Economic Journal, Korean International Economic Association, vol. 8(1), pages 77-90, April. [Downloadable!] (restricted)
  3. Jiandong Ju & Kala Krishna, 1997. "Market Access and Welfare Effects of Piecemeal Policy Reform," NBER Working Papers 6294, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Jiandong Ju & Kala Krishna, 1996. "Market Access and Welfare Effects of Free Trade Areas without Rules of Origin," NBER Working Papers 5480, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Jiandong Ju & Kala Krishna, 1998. "Firm Behavior and Market Access in a Free Trade Area with Rules of Origin," NBER Working Papers 6857, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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