Trade Restrictiveness and Deadweight Loss in China¡¯s Imports

Bo Chen () and Hong Ma
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Bo Chen: School of International Business Administration, Shanghai University of Finance and Economics, Shanghai 200433, China

Frontiers of Economics in China-Selected Publications from Chinese Universities, 2012, vol. 7, issue 3, 478-494

Abstract: China is believed to have gained immensely from its admission into to the World Trade Organization (WTO) in 2001. One of the direct gains comes from the lessening of deadweight loss (DWL) due to tariff reduction. Conventional measures for DWL, however, are too aggregate to capture the trade policies, which are determined at a much higher disaggregated level, and ignore the interactions between tariff and corresponding import demand as suggested by theories. In this paper, we first systematically estimate the import demand elasticities at a highly disaggregated level and then match them with the most detailed lines of the applied tariff for the most favored nations as reported by the WTO. Using the detailed matching data, we construct Feenstra¡¯s (1995) simplified trade restrictiveness index (TRI), which captures the covariance of tariff and the corresponding demand elasticity. Finally, we use the TRI to compute the DWL from1997 to 2008 and find that the DWL due to the tariff barrier was reduced to 0.73% of GNI in 2008, noticeably lower than the highest previous mark of 4.58% of GNI in 2001.

Keywords: demand elasticities; non-processing imports; deadweight loss (DWL) (search for similar items in EconPapers)
JEL-codes: F12 F14 O47 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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