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Effects of Tariffication: Tariffs and Quotas under Monopolistic Competition

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  • Jan Jørgensen
  • Philipp Schröder

Abstract

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

Suggested Citation

  • 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.
    • Handle: RePEc:kap:openec:v:18:y:2007:i:4:p:479-498
    DOI: 10.1007/s11079-007-9025-9
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    Cited by:

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    2. 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.
    3. Valentina Raimondi & Margherita Scoppola & Alessandro Olper, 2012. "Preference erosion and the developing countries exports to the EU: a dynamic panel gravity approach," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 148(4), pages 707-732, December.
    4. Susanne Dröge & Philipp Schröder, 2009. "The welfare comparison of corrective ad valorem and unit taxes under monopolistic competition," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(2), pages 164-175, April.
    5. Gouel, Christophe & Mitaritonna, Cristina & Ramos, Maria Priscila, 2011. "Sensitive products in the Doha negotiations: The case of European and Japanese market access," Economic Modelling, Elsevier, vol. 28(6), pages 2395-2403.
    6. Ehmer, Hanne Elisabeth, 2010. "Economic Policy and the Heterogeneous Firm," Munich Dissertations in Economics 11173, University of Munich, Department of Economics.

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    More about this item

    Keywords

    Trade policy; Tariffication; Specific tariff; Ad valorem tariff; Quota; Tariff rate quotas; VER; F02; F12; F13;
    All these keywords.

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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