Trade Restrictiveness Index of Non-Tariff Barriers Under the CES Preference

Wisarut Suwanprasert

International Economic Journal, 2020, vol. 34, issue 1, 48-57

Abstract: The literature has suggested formulas for trade restrictiveness index of tariffs based on second-order approximation. This paper shows that in a special case of the constant-elasticity-of-substitution (CES) preference the trade restrictiveness index of non-tariff barriers can be derived explicitly without using approximation and is simply the weighted $\left (\sigma -1\right ) $(σ−1)th-power average of non-tariff barriers, where σ is the elasticity of substitution and the weights are the observed expenditure shares of imported goods. Numerical simulations show that the proposed index accurately measures the aggregate of non-tariff barriers while other indices have persistent measurement errors.

Date: 2020
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DOI: 10.1080/10168737.2019.1671475

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