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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. Pritchett, Lant & Sethi, Geeta, 1994. "Tariff Rates, Tariff Revenue, and Tariff Reform: Some New Facts," World Bank Economic Review, World Bank Group, vol. 8(1), pages 1-16, January.
  2. 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.
  3. Grossman, Gene & Helpman, Elhanan, 1995. "Technology and Trade," CEPR Discussion Papers 1134, C.E.P.R. Discussion Papers.
  4. James Anderson & J. Peter Neary, 1998. "The mercantilist index of trade policy," LSE Research Online Documents on Economics 20242, London School of Economics and Political Science, LSE Library.
  5. J. Peter Neary, 1997. "Pitfalls in the theory of international trade policy : concertina reform of tariffs, and subsidies to high-technology industries," Working Papers 199726, School of Economics, University College Dublin.
  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. Kyle Bagwell & Robert W. Staiger, 1997. "An Economic Theory of GATT," NBER Working Papers 6049, National Bureau of Economic Research, Inc.
  8. J. P. Neary (ed.), 1995. "International Trade," Books, Edward Elgar, volume 0, number 575, April.
  9. J Anderson & J.P. Neary, 1993. "A New Approach to Evaluating Trade Policy," CEP Discussion Papers dp0173, Centre for Economic Performance, LSE.
  10. Neary, J Peter & Schweinberger, Albert G, 1986. "Factor Content Functions and the Theory of International Trade," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 421-32, July.
  11. O'Rourke, Kevin H., 1997. "Measuring protection: a cautionary tale," Journal of Development Economics, Elsevier, vol. 53(1), pages 169-183, June.
  12. Anderson, James E & Neary, J Peter, 1993. "Domestic Distortions and International Trade," CEPR Discussion Papers 786, C.E.P.R. Discussion Papers.
  13. Feenstra, R.C., 1995. "Estimating the Effects of Trade Policy," Papers 95-10, California Davis - Institute of Governmental Affairs.
  14. Anderson, James E, 1995. "Tariff-Index Theory," Review of International Economics, Wiley Blackwell, vol. 3(2), pages 156-73, June.
  15. 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.
  16. Anderson, James E, 1998. "Trade Restrictiveness Benchmarks," Economic Journal, Royal Economic Society, vol. 108(449), pages 1111-25, July.
  17. David Cox & Richard Harris, 1983. "Trade Liberalization and Industrial Organization: Some Estimates for Canada," Working Papers 523, Queen's University, Department of Economics.
  18. 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.
  19. Hatta, Tatsuo, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Wiley Blackwell, vol. 44(1), pages 1-21, February.
  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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