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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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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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(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. 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)
  2. 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)
  3. 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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  4. 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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