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GTAP Resource #3903

"Estimating effects of price-distorting policies using alternative distortions databases"
by Anderson, Kym, Will Martin and Dominique van der Mensbrugghe

Traditional trade-weighted aggregators of trade distortions are seriously flawed because the weights that they apply to any disaggregated product decline as the tariff on that product increases even as the welfare impacts of that distortion increase. This problem can be dealt with by defining two types of optimal aggregator—one for the impact of the tariff on expenditures on the good and for the volume of imports, and another for the tariff revenue impacts of the good.

The properties of these two indexes are shown to be quite different. At early stages of liberalization, the impact of a tariff reduction on tariff recenues is likely quite favorable, since the increase in import volume islikely to raise tariff revenues. However, when the tariff on a product reaches a low level, an increase in volume is likely to have only a modest impact on the value of tariff revenues because additional imports generate very little additional mact on import volume.

This change from one to two indexes requires a change in the structure of the model, recognizing two quantity measures for each good appearing in the model—one for the volume of the good at world prices and one for volumes at domestic prices. This, in turn, requires a change in the structure of the model used to analyze the reform. This session will present the methodology and software being made freely available for users to undertake this type of analysis.

An important finding of the empirical study is the sharp differences in the results between countries. For some countries, long run changes in the terms of trade dominate while in others, the changes in tariff revenues tend to dominate. ...

Resource Details (Export Citation) GTAP Keywords
Category: 2012 Conference Paper
Status: Published
By/In: Presented at the 15th Annual Conference on Global Economic Analysis, Geneva, Switzerland
Date: 2012
Created: van der Mensbrugghe, D. (4/30/2012)
Updated: Batta, G. (7/3/2012)
Visits: 1,934
No keywords have been specified.

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