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Domestic distortions and international trade

Author

Listed:
  • James E. Anderson
  • J. Peter Neary

Abstract

In this paper, we investigate techniques for measuring the trade policy equivalent of domestic distortions, using a distance function approach. Our measure, the Trade Restrictiveness Index, is shown to equal the uniform tariff which is welfare-equivalent to a given pattern of domestic taxes and subsidies. We extend the Index to incorporate taxes in markets for non-traded goods and factors of production and illustrates its operationality with an application to liberalisation in Mexican agriculture. We conclude that our Index has considerable potential in empirical work and as an aid to trade negotiations.

Suggested Citation

  • James E. Anderson & J. Peter Neary, 1992. "Domestic distortions and international trade," Working Papers 199217, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:199217
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    File URL: http://hdl.handle.net/10197/1688
    File Function: First version, 1992
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F10 - International Economics - - Trade - - - General

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