The perversity of preferences: GSP and developing country trade policies, 1976 - 2000

Caglar Ozden and Eric Reinhardt ()

No 2955, Policy Research Working Paper Series from The World Bank

Abstract: Industrial countries maintain special tariff preferences, namely the Generalized System of Preferences (GSP), for importsfrom developing countries. Critics have highlighted the underachieving nature of such preferences, but developing countries continue to place the GSP at the heart of their agenda in multilateral negotiations. What effect do such preferences have on a recipient's own trade policies? The authors develop and test a simple theoretical model of a small country's trade policy choice, using a dataset of 154 developing countries from 1976 through 2000. They find that countries removed from the GSP adopt more liberal trade policies than those remaining eligible. The results, corrected for endogeneity and robust to numerous alternative measures of trade policy, suggest that developing countries may be best served by full integration into the reciprocity-based world trade regime rather than continued GSP-style special preferences.

Keywords: Environmental Economics&Policies; Trade Policy; Economic Theory&Research; Rules of Origin; Payment Systems&Infrastructure; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Environmental Economics&Policies; Economic Theory&Research; Trade Policy; Trade and Regional Integration (search for similar items in EconPapers)
Date: 2003-01-31
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Citations: View citations in EconPapers (4)

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Journal Article: The perversity of preferences: GSP and developing country trade policies, 1976-2000 (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:2955

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