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Effects of Tariffication: Tariffs and Quotas under Monopolistic Competition

  • Jan Jørgensen
  • Philipp Schröder

    ()

Recent rounds of GATT and later WTO have advocated widespread tariffication, meaning that existing non-tariff barriers be converted into import equivalent tariffs. From an economic point of view, the effects of such tariffication are not entirely clear. The paper presents a trade model with monopolistic competition to examine the welfare effects of tariffication. The ranking of pre- and post-tariffication welfare crucially depends on the nature of the initial trade barrier and the tariff tool applied. Tariffication using a specific (ad valorem) tariff results in the same (reduced) welfare level compared to an initial sold quota, whereas welfare is increased (the same) compared to an initial shared quota. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11079-007-9025-9
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Article provided by Springer in its journal Open Economies Review.

Volume (Year): 18 (2007)
Issue (Month): 4 (September)
Pages: 479-498

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Handle: RePEc:kap:openec:v:18:y:2007:i:4:p:479-498
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=100323

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  1. Delipalla, Sofia & Keen, Michael, 1992. "The comparison between ad valorem and specific taxation under imperfect competition," Journal of Public Economics, Elsevier, vol. 49(3), pages 351-367, December.
  2. Hideki Konishi, 1999. "Tariffs versus Quotas with Strategic Investment," Canadian Journal of Economics, Canadian Economics Association, vol. 32(1), pages 71-91, February.
  3. Paul M. Romer, 1993. "New Goods, Old Theory, and the Welfare Costs of Trade Restrictions," NBER Working Papers 4452, National Bureau of Economic Research, Inc.
  4. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, June.
  5. Analysis, A Welfare & Das, Satya P. & Donnenfeld, Shabtai, 1987. "Trade policy and its impact on quality of imports," Journal of International Economics, Elsevier, vol. 23(1-2), pages 77-95, August.
  6. Kar-yiu Wong & Ben Lockwood, 1997. "Specific and Ad Valorem Tariffs are not Equivalent in Trade Wars," Working Papers 0081, University of Washington, Department of Economics.
  7. Kaempfer, William H & Marks, Stephen V, 1994. "The Possibility of Inefficient Liberalization through Tariffication," Review of International Economics, Wiley Blackwell, vol. 2(2), pages 123-30, June.
  8. Schmitt, Nicolas & Yu, Zhihao, 2001. "Economies of scale and the volume of intra-industry trade," Economics Letters, Elsevier, vol. 74(1), pages 127-132, December.
  9. Kowalczyk, Carsten & Skeath, Susan E., 1994. "Pareto ranking optimal tariffs under foreign monopoly," Economics Letters, Elsevier, vol. 45(3), pages 355-359.
  10. Nguyen, Trien & Perroni, Carlo & Wigle, Randall, 1993. "An Evaluation of the Draft Final Act of the Uruguay Round," Economic Journal, Royal Economic Society, vol. 103(421), pages 1540-49, November.
  11. Nguyen, T. & Perroni, C. & Wigle, R., 1993. "An Evaluation of the Final Act of the Uruguay Round," Working Papers 93003, Wilfrid Laurier University, Department of Economics.
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