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The Mercantilist Index of Trade Policy

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  • James E. Anderson
  • J. Peter Neary

Abstract

We introduce an index of trade policy restrictiveness defined as the uniform tariff that maintains the same trade volume as a given tariff/quota structure. Our index overcomes the problems of the trade-weighted average tariff: It avoids substitution bias, correctly accounts for general equilibrium transfers, and takes import volume instead of welfare as benchmark. Empirical applications to international cross section and time-series comparisons of trade policy confirm our theoretical results: Trade-weighted average tariffs generally underestimate the true height of tariffs as measured by the trade-volume-equivalent index; this in turn always underestimates the welfare-equivalent index. Copyright 2003 By The Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Suggested Citation

  • James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, May.
    • Handle: RePEc:ier:iecrev:v:44:y:2003:i:2:p:627-649
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    JEL classification:

    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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