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A New Approach to Evaluating Trade Policy

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  • Anderson, James E
  • Neary, J Peter

Abstract

This paper introduces a new measure, the Trade Restrictiveness Index, which measures the restrictiveness of a system of trade protection. The index is a general equilibrium application of the distance function and answers the question: `What uniform set of trade restrictions is equivalent (in welfare terms) to the initial protective structure?' The index is applicable to both tariffs and quotas and allows international and intertemporal comparisons. The index is operational and we provide an empirical example to illustrate its applicability and to show its superiority to commonly used measures.

Suggested Citation

  • Anderson, James E & Neary, J Peter, 1992. "A New Approach to Evaluating Trade Policy," CEPR Discussion Papers 683, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:683
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    References listed on IDEAS

    as
    1. Neary, J Peter, 1995. "Trade Liberalisation and Shadow Prices in the Presence of Tariffs and Quotas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 531-554, August.
    2. 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.
    3. Fukushima, Takashi, 1981. "A dynamic quantity adjustment process in a small open economy, and welfare effects of tariff changes," Journal of International Economics, Elsevier, pages 513-529.
    4. Neary, J. P. & Roberts, K. W. S., 1980. "The theory of household behaviour under rationing," European Economic Review, Elsevier, vol. 13(1), pages 25-42, January.
    5. Tatsuo Hatta, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Oxford University Press, vol. 44(1), pages 1-21.
    6. Trela, I. & Whalley, J., 1989. "Unravelling The Threads Of The Mfa," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 8904c, University of Western Ontario, The Centre for the Study of International Economic Relations.
    7. Lloyd, P. J., 1974. "A more general theory of price distortions in open economies," Journal of International Economics, Elsevier, pages 365-386.
    8. Diewert, W. E., 1985. "A dynamic approach to the measurement of waste in an open economy," Journal of International Economics, Elsevier, pages 213-240.
    9. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, January.
    10. Falvey, Rodney E., 1988. "Tariffs, quotas and piecemeal policy reform," Journal of International Economics, Elsevier, pages 177-183.
    11. Lopez, Ramon & Panagariya, Arvind, 1992. "On the Theory of Piecemeal Tariff Reform: The Case of Pure Imported Intermediate Inputs," American Economic Review, American Economic Association, pages 615-625.
    12. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, vol. 38(2), pages 281-297, March.
    13. Peter Neary, 1988. "Tariffs, Quotas, and Voluntary Export Restraints with and without Internationally Mobile Capital," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 714-735, November.
    14. Trela, I. & Whalley, J., 1989. "Unravelling The Threads Of The Mfa," University of Western Ontario, The Centre for the Study of International Economic Relations Working Papers 8904c, University of Western Ontario, The Centre for the Study of International Economic Relations.
    15. Corden, W. Max & Falvey, Rodney E., 1985. "Quotas and the second best," Economics Letters, Elsevier, vol. 18(1), pages 67-70.
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    More about this item

    Keywords

    Protection; Quantitative Restrictions; Tariffs; Trade Restrictiveness Index; Voluntary Export;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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