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

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  • James E. Anderson
  • J. Peter Neary

Abstract

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.

Suggested Citation

  • James E. Anderson & J. Peter Neary, 2004. "Welfare vs. Market Access: The Implications of Tariff Structure for Tariff Reform," NBER Working Papers 10730, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:10730
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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. J. Peter Neary, 1998. "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High‐Technology Industries," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 187-206, March.
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    6. 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.
    7. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
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    11. James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, May.
    12. Michael Bruno, 1972. "Market Distortions and Gradual Reform," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 39(3), pages 373-383.
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    Cited by:

    1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    2. Antoine Bouët & Simon Mevel & David Orden, 2007. "More or Less Ambition in the Doha Round: Winners and Losers from Trade Liberalisation with a Development Perspective," The World Economy, Wiley Blackwell, vol. 30(8), pages 1253-1280, August.
    3. Maria Cipollina & Luca Salvatici, 2008. "Measuring Protection: Mission Impossible?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 577-616, July.
    4. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
    5. Fofana, Ismaël & Cockburn, John & Decaluwé, Bernard & Mabugu, Ramos & Chitiga, Margaret & Latigo, Alfred & Abdourahman, Omar, 2006. "A Gender-Aware Integrated Macro-Micro Model for Evaluating Impacts of Policies on Poverty Reduction in Africa: The Case of South Africa," Conference papers 331562, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    6. Yu-Ter Wang, 2008. "On the Optimality of Escalated Tariff Structure: A Cournot Duopoly Analysis," The American Economist, Sage Publications, vol. 52(2), pages 72-76, October.

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    JEL classification:

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

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