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Welfare versus Market Access: The Implications of Tariff Structure for Tariff Reform

  • James E. Anderson

    ()

    (Boston College)

  • J. Peter Neary

    (University College Dublin)

We show that the effects of tariff changes on welfare and import volume can be fully characterised by their effects on the generalised mean and variance of the tariff distribution. Using these tools, we derive new results for welfare- and market-access-improving tariff changes, which imply two "cones of liberalisation" in price space. Because welfare is negatively but import volume positively related to the generalised variance, the cones do not intersect, which poses a dilemma for trade policy reform. Finally, we show that generalised and trade-weighted moments are mutually proportional when the trade expenditure function is CES.

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Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 601.

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Date of creation: 01 Aug 2004
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Handle: RePEc:boc:bocoec:601
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  1. Anderson, James E & Neary, J Peter, 1992. "A New Approach to Evaluating Trade Policy," CEPR Discussion Papers 683, C.E.P.R. Discussion Papers.
  2. Robert C. Feenstra, 1995. "Estimating the Effects of Trade Policy," NBER Working Papers 5051, National Bureau of Economic Research, Inc.
  3. Joseph Francois & Will Martin, 2002. "Commercial Policy Variability, Bindings, and Market Access," International Trade 0210002, EconWPA.
  4. Anderson, James E, 1995. "Tariff-Index Theory," Review of International Economics, Wiley Blackwell, vol. 3(2), pages 156-73, June.
  5. Anderson, James E & Neary, J Peter, 1998. "The Mercantilist Index of Trade Policy," CEPR Discussion Papers 2044, C.E.P.R. Discussion Papers.
  6. Francois, Joseph & Martin, Will, 2003. "Formula Approaches for Market Access Negotiations," CEPR Discussion Papers 3720, C.E.P.R. Discussion Papers.
  7. Tatsuo Hatta, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Oxford University Press, vol. 44(1), pages 1-21.
  8. Neary, J Peter, 1989. "Trade Liberalization and Shadow Prices in the Presence of Tariffs and Quotas," CEPR Discussion Papers 345, C.E.P.R. Discussion Papers.
  9. Michael Bruno, 1972. "Market Distortions and Gradual Reform," Review of Economic Studies, Oxford University Press, vol. 39(3), pages 373-383.
  10. Fukushima, Takashi, 1979. "Tariff Structure, Nontraded Goods and Theory of Piecemeal Policy Recommendations," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(2), pages 427-35, June.
  11. Rod Falvey, 1994. "Revenue enhancing tariff reform," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(1), pages 175-190, March.
  12. 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.
  13. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
  14. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  15. W. E. Diewert & A. H. Turunen-Red & A. D. Woodland, 1989. "Productivity- and Pareto-Improving Changes in Taxes and Tariffs," Review of Economic Studies, Oxford University Press, vol. 56(2), pages 199-215.
  16. Ju, Jiandong & Krishna, Kala, 2000. "Welfare and market access effects of piecemeal tariff reform," Journal of International Economics, Elsevier, vol. 51(2), pages 305-316, August.
  17. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, vol. 38(2), pages 281-97, March.
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