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Welfare vs. Market Access: The Implications of Tariff Structure for Tariff Reform

Listed author(s):
  • James E. Anderson
  • J. Peter Neary

We show that the effects of tariff changes on welfare and import volume can be fully characterized by their effects on the generalized 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 liberalization' in price space. Because welfare is negatively but import volume positively related to the generalized variance, the cones do not intersect, which poses a dilemma for trade policy reform. Finally, we show that generalized and trade-weighted moments are mutually proportional when the trade expenditure function is CES.

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File URL: http://www.nber.org/papers/w10730.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10730.

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Date of creation: Sep 2004
Publication status: published as Anderson, James E. & Neary, J. Peter, 2007. "Welfare versus market access: The implications of tariff structure for tariff reform," Journal of International Economics, Elsevier, vol. 71(1), pages 187-205, March.
Handle: RePEc:nbr:nberwo:10730
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  1. Neary, J. P., 1997. "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries," Papers 97/26, College Dublin, Department of Political Economy-.
  2. James E. Anderson & J. Peter Neary, 1996. "A New Approach to Evaluating Trade Policy," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 107-125.
  3. James E. Anderson, 1993. "Tariff Index Theory," Boston College Working Papers in Economics 215, Boston College Department of Economics.
  4. James E. Anderson & J. Peter Neary, 1999. "The Mercantilist Index of Trade Policy," NBER Working Papers 6870, National Bureau of Economic Research, Inc.
  5. Francois, Joseph & Martin, Will, 2002. "Commercial Policy Variability, Bindings and Market Access," CEPR Discussion Papers 3294, C.E.P.R. Discussion Papers.
  6. 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.
  7. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  8. Robert C. Feenstra, 1995. "Estimating the Effects of Trade Policy," NBER Working Papers 5051, National Bureau of Economic Research, Inc.
  9. Tatsuo Hatta, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Oxford University Press, vol. 44(1), pages 1-21.
  10. Joseph Francois & Will Martin, 2002. "Formula Approaches for Market Access Negotiations," Tinbergen Institute Discussion Papers 02-125/2, Tinbergen Institute.
  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. 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.
  13. Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import Demand Elasticities and Trade Distortions," CEPR Discussion Papers 4669, C.E.P.R. Discussion Papers.
  14. Michael Bruno, 1972. "Market Distortions and Gradual Reform," Review of Economic Studies, Oxford University Press, vol. 39(3), pages 373-383.
  15. 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 427-435, June.
  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.
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