The perversity of preferences : GSP and developing country trade policies, 1976 - 2000
AbstractIndustrial countries maintain special tariff preferences, namely the Generalized System of Preferences (GSP), for importsfrom developing countries. Critics have highlighted the underachieving nature of such preferences, but developing countries continue to place the GSP at the heart of their agenda in multilateral negotiations. What effect do such preferences have on a recipient's own trade policies? The authors develop and test a simple theoretical model of a small country's trade policy choice, using a dataset of 154 developing countries from 1976 through 2000. They find that countries removed from the GSP adopt more liberal trade policies than those remaining eligible. The results, corrected for endogeneity and robust to numerous alternative measures of trade policy, suggest that developing countries may be best served by full integration into the reciprocity-based world trade regime rather than continued GSP-style special preferences.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 2955.
Date of creation: 31 Jan 2003
Date of revision:
Environmental Economics&Policies; Trade Policy; Economic Theory&Research; Rules of Origin; Payment Systems&Infrastructure; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Environmental Economics&Policies; Economic Theory&Research; Trade Policy; Trade and Regional Integration;
Other versions of this item:
- Ozden, Caglar & Reinhardt, Eric, 2005. "The perversity of preferences: GSP and developing country trade policies, 1976-2000," Journal of Development Economics, Elsevier, vol. 78(1), pages 1-21, October.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-08-16 (All new papers)
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