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Import demand elasticities and trade distortions

Author

Listed:
  • Hiau Looi Kee
  • Nicita, Alessandro
  • Olarreaga, Marcelo

Abstract

To study the effects of tariffs on gross domestic product (GDP), one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. These do not exist. The authors modify Kohli's (1991) GDP function approach to estimate demand elasticities for 4,625 imported goods in 117 countries. Following Anderson and Neary (1992, 1994) and Feenstra (1995), they use these estimates to construct theoretically sound trade restrictiveness indices, and GDP lossesassociated with existing tariff structures. Countries are revealed to be 30 percent more restrictive than their simple or import-weighted average tariffs would suggest. Thus, distortion is nontrivial. GDP losses are largest in China, Germany, India, Mexico, and the United States.

Suggested Citation

  • Hiau Looi Kee & Nicita, Alessandro & Olarreaga, Marcelo, 2004. "Import demand elasticities and trade distortions," Policy Research Working Paper Series 3452, The World Bank.
  • Handle: RePEc:wbk:wbrwps:3452
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    More about this item

    Keywords

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

    JEL classification:

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

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