Trade restrictions with imported intermediate inputs: when does the trade balance improve?

Ramon Lopez and Dani Rodrik

No 174, Policy Research Working Paper Series from The World Bank

Abstract: The author's model demonstrates that when imports are predominantly intermediate inputs - as they are in most developing countries - import restrictions can not always be relied upon to improve the trade balance. Such restrictions act as a supply shock to the economy. Unless nontraded goods are intensive users of imported intermediaries, the general equilibrium consequence of import restrictions is a large enough reduction in export supplies to swamp the direct effect of the restrictions. The result is a deterioration of the trade balance.

Keywords: Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Trade Policy; Rules of Origin (search for similar items in EconPapers)
Date: 1989-03-31
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Citations: View citations in EconPapers (2)

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Journal Article: Trade restrictions with imported intermediate inputs: When does the trade balance improve? (1990)
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