The Optimal Degree of Reciprocity in Tariff Reduction
This article clari es the roles played by trade policy, in contrast with iceberg transport cost, in the popular setting of Melitz (2003), and characterizes the optimal reciprocal trade policy in such a setting. I show that import tariffs and iceberg transport cost are not equivalent in the strength of their trade- restricting effects and their welfare implications. With all the conflicting effectsof import tariffs on welfare considered, the optimal degree of reciprocity in multilateral tariff reduction turns out to be free trade.
|Date of creation:||Dec 2010|
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|Publication status:||Published in SMU Economics and Statistics Working Paper Series|
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- Demidova, Svetlana & Rodríguez-Clare, Andrés, 2009.
"Trade policy under firm-level heterogeneity in a small economy,"
Journal of International Economics,
Elsevier, vol. 78(1), pages 100-112, June.
- Svetlana Demidova & Andrés Rodríguez-Clare, 2007. "Trade Policy under Firm-Level Heterogeneity in a Small Economy," NBER Working Papers 13688, National Bureau of Economic Research, Inc.
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