The welfare consequences of import tariffs: A quantitative perspective

Gabriel Felbermayr, Benjamin Jung and Mario Larch

Journal of International Economics, 2015, vol. 97, issue 2, 295-309

Abstract: The quantitative trade literature often does not distinguish between tariffs and iceberg trade costs. This paper explores qualitatively and quantitatively how this distinction matters for the gains from trade. Most obviously, tariffs generate government revenues, while icebergs do not. In models of monopolistic competition, they may also affect entry. Finally, depending on whether they are modeled as cost or demand shifters, tariffs may have different implications on profits, entry, and, in turn, on the elasticity of trade flows and welfare. We show that the welfare formula by Arkolakis, Costinot, and Rodriguez-Clare (2012) requires qualification, even in the simple single-sector case. We find that the quantitative welfare consequences of cost- versus demand-shifting tariffs can be important.

Keywords: Gravity equation; Monopolistic competition; Heterogeneous firms; International trade; Trade policy; Gains from trade (search for similar items in EconPapers)
JEL-codes: F10 F11 F12 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (51)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:97:y:2015:i:2:p:295-309

DOI: 10.1016/j.jinteco.2015.05.002

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