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What Goes Around Comes Around: Export-Enhancing Effects of Import- Tariff Reductions

Author

Listed:
  • Kazunobu Hayakawa

    () (Institute of Developing Economies)

  • Jota Ishikawa

    () (Faculty of Economics, Hitotsubashi University and the Research Institute of Economy, Trade and Industry)

  • Nori Tarui

    () (Department of Economics, University of Hawaii at Manoa and the University of Hawaii Economic Research Organization)

Abstract

In international trade, transportation requires a round trip for which a transport firm has to commit to the shipping capacity to meet the maximum shipping volume. This may cause the “backhaul problem.†Trade theory suggests that facing the problem, transport firms with market power adjust their freight rates strategically when import tariffs change. As a consequence, a country reducing its import tariffs may experience an increase in exports as well as imports. Using worldwide data during 2000-2007, we find evidence that supports these predictions. These findings indicate a new mechanism through which import-tariff reductions lead to export expansions.

Suggested Citation

  • Kazunobu Hayakawa & Jota Ishikawa & Nori Tarui, 2018. "What Goes Around Comes Around: Export-Enhancing Effects of Import- Tariff Reductions," Working Papers 201808, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:201808
    as

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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_18-08.pdf
    File Function: First version, 2018
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Transport firm; freight rates; tariffs; backhaul problem;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • R40 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics - - - General

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