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Alternative measures for trade restrictiveness. A gravity approach

Author

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  • Carmen Fillat

    (Applied Economics Department. University of Zaragoza)

  • Eva Pardos

    (Applied Economics Department. University of Zaragoza)

Abstract

We show that it is possible to estimate the cost of protection in terms of the trade loss for the protected country using a widely accepted and theory-based specification of the gravity model in combination with descriptive trade policy indicators. Data and implementation requirements are lower than in CGE models and this permits estimations with wider samples of countries and years. The outcome can be interpreted as the uniform tariff that synthesizes both the direct effect of trade barriers and the indirect effect of import substitution. The estimated tariff equivalents confirm the underestimation of protection costs by more than 40% when using weighted average tariffs, in accordance with previous literature, with a greater measurement error for less developed countries. Furthermore, substitution elasticities are shown to be a key mechanism for the restrictiveness of tariff policies

Suggested Citation

  • Carmen Fillat & Eva Pardos, 2007. "Alternative measures for trade restrictiveness. A gravity approach," Documentos de Trabajo dt2007-02, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.
    • Handle: RePEc:zar:wpaper:dt2007-02
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    References listed on IDEAS

    as
    1. Estevadeordal, Antoni, 1997. "Measuring protection in the early twentieth century," European Review of Economic History, Cambridge University Press, vol. 1(1), pages 89-125, April.
    2. Arvind Panagariya, 2002. "Cost of Protection: Where Do We Stand?," American Economic Review, American Economic Association, vol. 92(2), pages 175-179, May.
    3. Robert E. Baldwin, 1989. "Measuring Nontariff Trade Policies," NBER Working Papers 2978, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Raúl Serrano & Vicente Pinilla, 2014. "New directions of trade for the agri-food industry: a disaggregated approach for different income countries, 1963–2000," Latin American Economic Review, Springer;Centro de Investigaciòn y Docencia Económica (CIDE), vol. 23(1), pages 1-22, December.
    2. Ra�l Comp�s & Samuel Faria & T�nia Gon�alves & Vicente Pinilla & Jo�o Rebelo & Katrin Sim�n-Elorz, 2021. "The shock of lockdown on the spending on wine in the Iberian market: the effects of procurement and consumption patterns," Documentos de Trabajo dt2021-04, Facultad de Ciencias Económicas y Empresariales, Universidad de Zaragoza.

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    More about this item

    Keywords

    Tariff policy; cost of protection; foreign trade; gravity equation; tariff equivalent;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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