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Import demand elasticities and trade distortions

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Author Info
Hiau Looi Kee
Nicita, Alessandro
Olarreaga, Marcelo

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Abstract

To study the effects of tariffs on gross domestic product (GDP), one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. These do not exist. The authors modify Kohli's (1991) GDP function approach to estimate demand elasticities for 4,625 imported goods in 117 countries. Following Anderson and Neary (1992, 1994) and Feenstra (1995), they use these estimates to construct theoretically sound trade restrictiveness indices, and GDP lossesassociated with existing tariff structures. Countries are revealed to be 30 percent more restrictive than their simple or import-weighted average tariffs would suggest. Thus, distortion is nontrivial. GDP losses are largest in China, Germany, India, Mexico, and the United States.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3452.

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Date of creation: 01 Nov 2004
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Handle: RePEc:wbk:wbrwps:3452

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Keywords: Environmental Economics&Policies; Consumption; Economic Theory&Research; Markets and Market Access; Information Technology; Environmental Economics&Policies; Economic Theory&Research; Access to Markets; Markets and Market Access; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT;

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  18. Anderson, James E & Neary, J Peter, 1994. "Measuring the Restrictiveness of Trade Policy," World Bank Economic Review, Oxford University Press, vol. 8(2), pages 151-69, May.
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