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Trade restrictions with imported intermediate inputs : when does the trade balance improve?

  • Lopez, Ramon
  • Rodrik, Dani

The author's model demonstrates that when imports are predominantly intermediate inputs - as they are in most developing countries - import restrictions can not always be relied upon to improve the trade balance. Such restrictions act as a supply shock to the economy. Unless nontraded goods are intensive users of imported intermediaries, the general equilibrium consequence of import restrictions is a large enough reduction in export supplies to swamp the direct effect of the restrictions. The result is a deterioration of the trade balance.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 174.

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Date of creation: 31 Mar 1989
Date of revision:
Handle: RePEc:wbk:wbrwps:174
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  1. Charles Engel & Kenneth Kletzer, 1986. "Tariffs, Saving and the Current Account," NBER Working Papers 1869, National Bureau of Economic Research, Inc.
  2. repec:oup:qjecon:v:97:y:1982:i:2:p:251-70 is not listed on IDEAS
  3. Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, vol. 91(1), pages 97-125, February.
  4. Razin, Assaf & Svensson, Lars E. O., 1983. "Trade taxes and the current account," Economics Letters, Elsevier, vol. 13(1), pages 55-57.
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