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The Possibility of Inefficient Liberalization through Tariffication


  • Kaempfer, William H
  • Marks, Stephen V


A typical step in trade liberalization under the GATT is tariffication--the conversion of quantitative import restrictions to their ad valorem tariff equivalents. This paper shows that, if there is market power in the protected industry, tarrification may cause a global efficiency loss. In particular, in a small country if the protected industry is a monopoly that is freely able to export but cannot profitably do so, then tarrification unambiguously imposes global efficiency costs. In a a large country, the global efficiency effects are uncertain a priori. In both cases, however, tarrification unambiguously benefits the monopoly and lowers foreign welfare. Copyright 1994 by Blackwell Publishing Ltd.

Suggested Citation

  • Kaempfer, William H & Marks, Stephen V, 1994. "The Possibility of Inefficient Liberalization through Tariffication," Review of International Economics, Wiley Blackwell, vol. 2(2), pages 123-130, June.
  • Handle: RePEc:bla:reviec:v:2:y:1994:i:2:p:123-30

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    References listed on IDEAS

    1. Kala Krishna & Kathleen Hogan & Phillip Swagel, 1989. "The Non-Optimality of Optimal Trade Policy: The U.S. Automobile Indust ry Revisited, 1979-1985," NBER Working Papers 3118, National Bureau of Economic Research, Inc.
    2. Trela, I. & Whalley, J., 1988. "Do Developing Countries Lose From The Mfa?," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 8804c, University of Western Ontario, The Centre for the Study of International Economic Relations.
    3. Kala Krishna, 1988. "The Case of the Vanishing Revenues: Auction Quotas With Oligopoly," NBER Working Papers 2723, National Bureau of Economic Research, Inc.
    4. Richard E. Baldwin & Paul Krugman, 1986. "Market Access and International Competition: A Simulation Study of 16K Random Access Memories," NBER Working Papers 1936, National Bureau of Economic Research, Inc.
    5. Carlos Alfredo Rodriguez, 1979. "The Quality of Imports and the Differential Welfare Effects of Tariffs, Quotas, and Quality Controls as Protective Devices," Canadian Journal of Economics, Canadian Economics Association, vol. 12(3), pages 439-449, August.
    6. Kala Krishna, 1985. "Tariffs vs. Quotas with Endogenous Quality," NBER Working Papers 1535, National Bureau of Economic Research, Inc.
    7. Hamilton, Carl, 1986. "An Assessment of Voluntary Restraints on Hong Kong Exports to Europe and the USA," Economica, London School of Economics and Political Science, vol. 53(211), pages 339-350, August.
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    Cited by:

    1. Chen, Hung-Yi & Chang, Yang-Ming & Chiou, Jiunn-Rong, 2011. "A welfare analysis of tariffs and equivalent quotas under demand uncertainty: Implications for tariffication," International Review of Economics & Finance, Elsevier, vol. 20(4), pages 549-561, October.
    2. Jan Jørgensen & Philipp Schröder, 2007. "Effects of Tariffication: Tariffs and Quotas under Monopolistic Competition," Open Economies Review, Springer, vol. 18(4), pages 479-498, September.
    3. Jan G. Jorgensen & Philipp J. H. Schröder, 2002. "Effects of Tariffication: Tariffs, Quotas and VERs under Monopolistic Competition," Discussion Papers of DIW Berlin 269, DIW Berlin, German Institute for Economic Research.

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