The Mercantilist Index of Trade Policy.
We introduce an index of trade policy restrictiveness defined as the uniform tariff that maintains the same trade volume as a given tariff/quota structure. Our index overcomes the problems of the trade-weighted average tariff: It avoids substitution bias, correctly accounts for general equilibrium t...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
| Published: |
Blackwell Publishing
2003
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| Summary: | We introduce an index of trade policy restrictiveness defined as the uniform tariff that maintains the same trade volume as a given tariff/quota structure. Our index overcomes the problems of the trade-weighted average tariff: It avoids substitution bias, correctly accounts for general equilibrium transfers, and takes import volume instead of welfare as benchmark. Empirical applications to international cross section and time-series comparisons of trade policy confirm our theoretical results: Trade-weighted average tariffs generally underestimate the true height of tariffs as measured by the trade-volume-equivalent index; this in turn always underestimates the welfare-equivalent index. |
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