IDEAS home Printed from https://ideas.repec.org/p/wbk/wbrwps/1163.html
   My bibliography  Save this paper

Domestic distortions and international trade

Author

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

Abstract

Trade is affected not only by taxes and subsidies that affect producers and consumers of goods, but also, indirectly, by taxes and subsidies that affect nontraded goods or factors of production. The authors show how the Trade Restrictiveness Index (TRI) may be extended to incorporate these types of distortions. Again, the value of the TRI gives the equiproportionate change in the prices of traded goods, which would compensate for a given change in all distortions, both in traded and nontraded goods and in factor markets. The authors, who developed the theory of the TRI, show how to apply it in practice, drawing on a larger study by Anderson and Bannister of changes in Mexican agricultural policy between 1985 and 1989. Adapting the TRI to a partial equilibrium context allows existing estimates of key demand and supply elasticities to be incorporated into the Index; and the basic formula is adapted to take account of some special features of Mexican agricultural markets. The TRI shows a great increase in restrictiveness in 1986 and especially 1987, followed by major reductions in restrictiveness in 1988 and 1989. The cumulative effect: a 49.9 percent fall in trade restrictiveness over the four years. The major, although not the only, source of changes in trade restrictiveness were changes in producer subsidies, especially for maize. These trends are not captured by changes in indices for consumer and producer subsidy equivalents, which the authors also present. Indeed, in a number of years at least one of the ad hoc indices changed in the opposite direction to the change in the corresponding welfare-based index.

Suggested Citation

  • Anderson, James E. & Neary, J. Peter, 1993. "Domestic distortions and international trade," Policy Research Working Paper Series 1163, The World Bank.
  • Handle: RePEc:wbk:wbrwps:1163
    as

    Download full text from publisher

    File URL: http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/1993/07/01/000009265_3961005013833/Rendered/PDF/multi0page.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. 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.
    2. Neary, J Peter, 1995. "Trade Liberalisation and Shadow Prices in the Presence of Tariffs and Quotas," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 36(3), pages 531-554, August.
    3. Anderson, James E & Neary, J Peter, 1992. "Trade Reform with Quotas, Partial Rent Retention, and Tariffs," Econometrica, Econometric Society, vol. 60(1), pages 57-76, January.
    4. Jones, Ronald W. & Peter Neary, J., 1984. "The positive theory of international trade," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 1, pages 1-62 Elsevier.
    5. Tatsuo Hatta, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Oxford University Press, vol. 44(1), pages 1-21.
    6. Michael Bruno, 1972. "Market Distortions and Gradual Reform," Review of Economic Studies, Oxford University Press, vol. 39(3), pages 373-383.
    7. Diewert, W. E., 1985. "A dynamic approach to the measurement of waste in an open economy," Journal of International Economics, Elsevier, vol. 19(3-4), pages 213-240, November.
    8. James E. Anderson, 1988. "The Relative Inefficiency of Quotas," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262511789, January.
    9. Anderson, James E, 1995. "Tariff-Index Theory," Review of International Economics, Wiley Blackwell, vol. 3(2), pages 156-173, June.
    10. Foster, Edward & Sonnenschein, Hugo, 1970. "Price Distortion and Economic Welfare," Econometrica, Econometric Society, vol. 38(2), pages 281-297, March.
    11. Peter Neary, 1988. "Tariffs, Quotas, and Voluntary Export Restraints with and without Internationally Mobile Capital," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 714-735, November.
    12. Anderson, James E. & Bannister, Geoffrey, 1992. "The trade restrictiveness index : an application to Mexican agriculture," Policy Research Working Paper Series 874, The World Bank.
    13. Bertrand, Trent J & Vanek, Jaroslav, 1971. "The Theory of Tariffs, Taxes, and Subsidies: Some Aspects of the Second Best," American Economic Review, American Economic Association, vol. 61(5), pages 925-931, December.
    14. Lloyd, P. J., 1974. "A more general theory of price distortions in open economies," Journal of International Economics, Elsevier, vol. 4(4), pages 365-386, November.
    15. Jones, Ronald W, 1971. "Distortions in Factor Markets and the General Equilibrium Model of Production," Journal of Political Economy, University of Chicago Press, vol. 79(3), pages 437-459, May-June.
    16. Angus Deaton, 1979. "The Distance Function in Consumer Behaviour with Applications to Index Numbers and Optimal Taxation," Review of Economic Studies, Oxford University Press, vol. 46(3), pages 391-405.
    17. Falvey, Rodney E., 1988. "Tariffs, quotas and piecemeal policy reform," Journal of International Economics, Elsevier, vol. 25(1-2), pages 177-183, August.
    18. Magee, Stephen P, 1973. "Factor Market Distortions, Production, and Trade: A Survey," Oxford Economic Papers, Oxford University Press, vol. 25(1), pages 1-43, March.
    19. Neary, J Peter, 1978. "Dynamic Stability and the Theory of Factor-Market Distortions," American Economic Review, American Economic Association, vol. 68(4), pages 671-682, September.
    20. Corden, W. Max & Falvey, Rodney E., 1985. "Quotas and the second best," Economics Letters, Elsevier, vol. 18(1), pages 67-70.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    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. Salvatici, Luca & Carter, Colin A. & Sumner, Daniel A., 1997. "The Trade Restrictiveness Index and its Potential Contribution to Agricultural Policy Analysis," 1997 Conference, August 10-16, 1997, Sacramento, California 197065, International Association of Agricultural Economists.
    3. Ker, Alan P., 2000. "Modeling Technical Trade Barriers Under Uncertainty," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 0(Number 1), pages 1-23, July.
    4. Peter J. Lloyd & Johanna L. Croser & Kym Anderson, 2010. "Global Distortions to Agricultural Markets: Indicators of Trade and Welfare Impacts, 1960 to 2007," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 141-160, May.
    5. John C. Beghin & Bo Xiong, 2016. "Economic Effects of Standard-Like Nontariff Measures: Analytical and Methodological Dimensions," Food and Agricultural Policy Research Institute (FAPRI) Publications 16-wp569, Food and Agricultural Policy Research Institute (FAPRI) at Iowa State University.
    6. Maria Cipollina & Luca Salvatici, 2008. "Measuring Protection: Mission Impossible?," Journal of Economic Surveys, Wiley Blackwell, vol. 22(3), pages 577-616, July.
    7. 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.
    8. Salvatici, Luca & Carter, Colin A. & Sumner, Daniel A., 1997. "The Trade Restrictiveness Index: The Potential Contribution To Agricultural Policy Analysis," 1997 Annual meeting, July 27-30, Toronto, Canada 21028, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    9. Feenstra, Robert C., 1995. "Estimating the effects of trade policy," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 30, pages 1553-1595 Elsevier.
    10. James E. Anderson, 1994. "Effective Protection Redux," Boston College Working Papers in Economics 273., Boston College Department of Economics.
    11. Anderson, James E., 1998. "Effective protection redux1," Journal of International Economics, Elsevier, vol. 44(1), pages 21-44, February.
    12. Anderson, James E., 1998. "The Uruguay Round and welfare in some distorted agricultural economies," Journal of Development Economics, Elsevier, vol. 56(2), pages 393-410, August.
    13. Anderson, James E, 1998. "Trade Restrictiveness Benchmarks," Economic Journal, Royal Economic Society, vol. 108(449), pages 1111-1125, July.
    14. Hans Gersbach & Hans Haller, 2007. "Hierarchical Trade and Endogenous Price Distortions," CER-ETH Economics working paper series 07/72, CER-ETH - Center of Economic Research (CER-ETH) at ETH Zurich.
    15. Chi-Chur Chao & Eden Yu, 1998. "Optimal pollution and foreign-investment taxes in a small open economy," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 7(1), pages 71-85.
    16. Hamid Beladi & Chi-Chur Chao, 2006. "Mixed Ownership, Unemployment, and Welfare for a Developing Economy," Review of Development Economics, Wiley Blackwell, vol. 10(4), pages 604-611, November.
    17. Antoine Bou√ęt, 2000. "La mesure des protections commerciales nationales," Working Papers 2000-15, CEPII research center.
    18. Christos Pantzios, 2000. "Trade Restrictiveness in the Presence of 'New' Goods," Open Economies Review, Springer, vol. 11(1), pages 93-101, January.
    19. Pantzios, Christos J. & Taylor, Timothy G., 1998. "Trade Liberalization And Japanese Agricultural Import Policies," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 0(Number 2), pages 1-13, December.

    More about this item

    Keywords

    Access to Markets; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Markets and Market Access; Environmental Economics&Policies; Economic Theory&Research;

    JEL classification:

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

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:1163. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi). General contact details of provider: http://edirc.repec.org/data/dvewbus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.