Tariff Reductions, Entry, and Welfare: Theory and Evidence for the Last Two Decades / Lorenzo Caliendo, Robert C. Feenstra, John Romalis, Alan M. Taylor.

Format:

Book

Author/Creator:

Caliendo, Lorenzo.

Contributor:

National Bureau of Economic Research.

Feenstra, Robert C.

Romalis, John.

Taylor, Alan M.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21768.

NBER working paper series no. w21768

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Tariff Reductions, Entry, and Welfare

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2015.

Summary:

We show in a multi-sector, heterogeneous-firm trade model that the effect of tariffs on entry, especially in the presence of production linkages, can reverse the traditional positive optimal tariff argument. We then use a new tariff dataset, and apply it to a 189-country, 15-sector version of our model, to quantify the trade, entry, and welfare effects of trade liberalization over the period 1990-2010. We find that the impact on firm entry was larger in Advanced relative to Emerging and Developing countries; that slightly more than three-quarters of the total gains from trade are a consequence of the reductions in MFN tariffs (the Uruguay Round), with two-thirds of the remainder due to preferential trade agreements and one third due to the hypothetical movement to free trade; and that free trade would bring gains for some Emerging and Developing countries, in particular. Ten economies in our sample - including China, Hong Kong, India, Israel, Vietnam, and five more remote countries - would have benefited from going beyond free trade to subsidizing their imports in 1990, since their optimal tariffs are negative.

Notes:

Print version record

December 2015.