The Optimal Degree of Reciprocity in Tariff Reduction

Pao-Li Chang ()

No 32-2010, Working Papers from Singapore Management University, School of Economics

Abstract: This article clari es the roles played by trade policy, in contrast with iceberg transport cost, in the popular setting of Melitz (2003), and characterizes the optimal reciprocal trade policy in such a setting. I show that import tariffs and iceberg transport cost are not equivalent in the strength of their trade- restricting effects and their welfare implications. With all the conflicting effectsof import tariffs on welfare considered, the optimal degree of reciprocity in multilateral tariff reduction turns out to be free trade.

Keywords: Firm Heterogeneity; Reciprocal Trade Policy (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Pages: 13 pages
Date: 2010-12
New Economics Papers: this item is included in nep-int and nep-sea
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Published in SMU Economics and Statistics Working Paper Series

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Related works:
Journal Article: The Optimal Degree of Reciprocity in Tariff Reduction (2020)
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