Heterogeneous Effects of Tariff and Non-tariff Trade-Policy Barriers in Quantitative General Equilibrium
Peter Egger () and
Katharina Erhardt ()
No 13602, CEPR Discussion Papers from C.E.P.R. Discussion Papers
Structural quantitative work in international economics typically treats trade policy as log-linearly related to trade costs and as exogenous. This paper proposes a structural approach that allows for a non-parametric relationship and treats tariff and non-tariff trade-policy variables as potentially endogenous in log-linear estimation. We document that the data reject the assumption of log-linearity of trade costs in both the tariff- and the non-tariff-policy domains. Specifically, the partial impact of a change in tariffs is strongest for low policy barriers and medium levels of tariffs but generally decreases in the level of both non-tariff barriers and tariff barriers. To give a relevant illustration, we assess the effects of a unilateral increase of US tariffs on Chinese imports by 10 percentage points and document that the estimated effects on real bilateral trade-flow changes would be largely underestimated by standard approaches.
Keywords: Generalized propensity scores; Gravity models; Non-parametric methods; Semi-parametric methods; trade policy (search for similar items in EconPapers)
JEL-codes: C14 F13 F14 (search for similar items in EconPapers)
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