 Trade Policy with Heterogeneous Traders: Do Quotas Get a Bum Rap?Kala Krishna () and Ling Hui Tan No 2007/092, IMF Working Papers from International Monetary Fund Abstract: This paper considers the effects of trade policy-tariffs and quotas-when importing is done by competitive traders who are identical ex ante but differ ex post. We show that the standard equivalence results no longer hold and the conventional ranking of tariffs and quotas is turned on its head: quotas are not as bad for welfare as previously believed, while tariffs may restrict trade by more than originally intended. Furthermore, the allocation of property rights (quota licenses) has real effects beyond the distribution of rents; this, in turn, has implications for the effects of corruption on welfare. Keywords: WP; free trade; supply price; average cost; trade policy; tariffs; quotas; firm heterogeneity; entry; quota license; quota rent; free trade equilibrium; import equivalent; market clearing price; auction quota; quota allocation scheme; license price; specific tariff; Trade liberalization; Imports; Import quotas; Asia and Pacific (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:imf:imfwpa:2007/092 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in IMF Working Papers from International Monetary Fund International Monetary Fund, Washington, DC USA. Contact information at EDIRC. |
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