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Effects of Tariffication: Tariffs, Quotas and VERs under Monopolistic Competition

Jan Jørgensen and Philipp Schröder

No 269, Discussion Papers of DIW Berlin from DIW Berlin, German Institute for Economic Research

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 general equilibrium model with monopolistic competition to examine the welfare effects of tariffication. The ranking of pre- and post-tariffication welfare depends crucially on the nature of the initial trade barrier and the tariff tool applied. Tariffication using a specific (an ad valorem) tariff results in the same (a reduced) welfare level compared to an initial quota, whereas welfare is increased (the same) compared to an initial VER.

Keywords: Trade policy; tariffication; specific tariff; ad valorem tariff; quota; VER (search for similar items in EconPapers)
JEL-codes: F2 F12 F13 (search for similar items in EconPapers)
Date: 2002
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