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Domestic Distortions and International Trade

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  • Anderson, James E
  • Neary, J Peter

Abstract

In this paper we develop techniques for measuring the trade policy equivalent of domestic distortions, using a distance function approach. Our measure, the Trade Restrictiveness Index, is shown to equal the uniform tariff which is welfare-equivalent to a given pattern of domestic taxes and subsidies. We extend the Index to incorporate taxes on non-traded goods and factor markets and illustrate its operationality with an application to liberalization in Mexican agriculture. We conclude that our Index has considerable potential in empirical work and as an aid to trade negotiators.

Suggested Citation

  • Anderson, James E & Neary, J Peter, 1993. "Domestic Distortions and International Trade," CEPR Discussion Papers 786, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:786
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    1. James E. Anderson & J. Peter Neary, 1996. "A New Approach to Evaluating Trade Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 63(1), pages 107-125.
    2. 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.
    3. 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.
    4. Anderson, James E. & Bannister, Geoffrey, 1992. "The trade restrictiveness index : an application to Mexican agriculture," Policy Research Working Paper Series 874, The World Bank.
    5. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, April.
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    12. Diewert, W. E., 1985. "A dynamic approach to the measurement of waste in an open economy," Journal of International Economics, Elsevier, vol. 19(3-4), pages 213-240, November.
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    14. Falvey, Rodney E., 1988. "Tariffs, quotas and piecemeal policy reform," Journal of International Economics, Elsevier, vol. 25(1-2), pages 177-183, August.
    15. Anderson, James E, 1995. "Tariff-Index Theory," Review of International Economics, Wiley Blackwell, vol. 3(2), pages 156-173, June.
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    More about this item

    Keywords

    Consumer Subsidy; Domestic Distortions; Producer Subsidy; Trade Policy; Trade Restrictiveness Index;
    All these keywords.

    JEL classification:

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

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