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The Mercantilist Index of Trade Policy

  • James E. Anderson
  • J. Peter Neary

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.

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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 44 (2003)
Issue (Month): 2 (05)
Pages: 627-649

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Handle: RePEc:ier:iecrev:v:44:y:2003:i:2:p:627-649
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  1. Anderson, James E & Bannister, Geoffrey J & Neary, J Peter, 1995. "Domestic Distortions and International Trade," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(1), pages 139-57, February.
  2. Robert Feenstra, 2004. "Estimating The Effects Of Trade Policy," Working Papers 9510, University of California, Davis, Department of Economics.
  3. Anderson, James E & Neary, J Peter, 1996. "A New Approach to Evaluating Trade Policy," Review of Economic Studies, Wiley Blackwell, vol. 63(1), pages 107-25, January.
  4. James E. Anderson & J. Peter Neary, 1998. "The Mercantilist Index of Trade Policy," Boston College Working Papers in Economics 416, Boston College Department of Economics.
  5. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 1-21, February.
  6. Pritchett, Lant, 1996. "Measuring outward orientation in LDCs: Can it be done?," Journal of Development Economics, Elsevier, vol. 49(2), pages 307-335, May.
  7. Grossman, Gene M. & Helpman, Elhanan, 1995. "Technology and trade," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 25, pages 1279-1337 Elsevier.
  8. Anderson, James E., 1992. "Tariff index theory," Policy Research Working Paper Series 1023, The World Bank.
  9. Kyle Bagwell & Robert W. Staiger, 1997. "An Economic Theory of GATT," NBER Working Papers 6049, National Bureau of Economic Research, Inc.
  10. Neary, J Peter, 1998. " Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 187-206, March.
  11. Pritchett, Lant & Sethi, Geeta, 1993. "Tariff rates, tariff revenue, and tariff reform : some new facts," Policy Research Working Paper Series 1143, The World Bank.
  12. Aw, Bee Yan & Roberts, Mark J., 1986. "Measuring quality change in quota-constrained import markets: The Case of U.S. Footwear," Journal of International Economics, Elsevier, vol. 21(1-2), pages 45-60, August.
  13. Randi Boorstein & Robert C. Feenstra, 1987. "Quality Upgrading and its Welfare Cost in U.S. Steel Imports, 1969-74," NBER Working Papers 2452, National Bureau of Economic Research, Inc.
  14. J. P. Neary (ed.), 1995. "International Trade," Books, Edward Elgar, volume 0, number 575, March.
  15. Anderson, James E, 1998. "Trade Restrictiveness Benchmarks," Economic Journal, Royal Economic Society, vol. 108(449), pages 1111-25, July.
  16. David Cox & Richard Harris, 1983. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Working Papers 523, Queen's University, Department of Economics.
  17. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
  18. Kevin H. O'Rourke, 1994. "Measuring protection : a cautionary tale," Working Papers 199423, School of Economics, University College Dublin.
  19. Neary, J Peter & Schweinberger, Albert G, 1984. "Factor Content Functions and the Theory of International Trade," CEPR Discussion Papers 3, C.E.P.R. Discussion Papers.
  20. Michael D. Bordo & Barry Eichengreen & Douglas A. Irwin, 1999. "Is Globalization Today Really Different than Globalization a Hunderd Years Ago?," NBER Working Papers 7195, National Bureau of Economic Research, Inc.
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