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Effects of Tariffication: Tariffs and Quotas under Monopolistic Competition

Jan Jørgensen and Philipp Schröder

Open Economies Review, 2007, vol. 18, issue 4, 479-498

Abstract: Recent rounds of GATT and later WTO have advocated widespread tariffication, meaning that existing non-tariff barriers be converted into import equivalent tariffs. From an economic point of view, the effects of such tariffication are not entirely clear. The paper presents a trade model with monopolistic competition to examine the welfare effects of tariffication. The ranking of pre- and post-tariffication welfare crucially depends on the nature of the initial trade barrier and the tariff tool applied. Tariffication using a specific (ad valorem) tariff results in the same (reduced) welfare level compared to an initial sold quota, whereas welfare is increased (the same) compared to an initial shared quota. Copyright Springer Science+Business Media, LLC 2007

Keywords: Trade policy; Tariffication; Specific tariff; Ad valorem tariff; Quota; Tariff rate quotas; VER; F02; F12; F13 (search for similar items in EconPapers)
Date: 2007
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Handle: RePEc:kap:openec:v:18:y:2007:i:4:p:479-498