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Backfiring with Backhaul Problems: Trade and Industrial Policies with Endogenous Transport Costs

Listed author(s):
  • ISHIKAWA, Jota
  • TARUI, Norio
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    Trade barriers due to transport costs are as large as those due to tariffs. This paper incorporates the transport sector into a standard model of international trade and studies the effects of trade and industrial policies. Transport firms need to commit to a shipping capacity sufficient for a round trip, with a possible imbalance of shipping volumes in two directions. This imbalance is known as the “backhaul problem.” As transport firms attempt to avoid this problem, a tariff in one sector may affect other independent import and/or export sectors. In particular, domestic tariffs may backfire: domestic exports may also decrease, harming domestic export sectors and the domestic economy. This finding contributes to the literature on how import liberalization may generate a positive effect on the liberalizing country’s exports by identifying a new channel through endogenous changes in transport costs given the backhaul problem.

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    File URL: http://hermes-ir.lib.hit-u.ac.jp/rs/bitstream/10086/28852/1/070_hiasDP-E-57.pdf
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    Paper provided by Hitotsubashi Institute for Advanced Study, Hitotsubashi University in its series Discussion paper series with number HIAS-E-57.

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    Length: 39, [9] p.
    Date of creation: Oct 2017
    Handle: RePEc:hit:hiasdp:hias-e-57
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