Welfare vs. Market Access: The Implications of Tariff Structure for Tariff Reform

47 Pages Posted: 20 Sep 2004 Last revised: 29 Oct 2022

See all articles by James E. Anderson

James E. Anderson

Boston College - Department of Economics; National Bureau of Economic Research (NBER)

J. Peter Neary

University of Oxford - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: September 2004

Abstract

We show that the effects of tariff changes on welfare and import volume can be fully characterized by their effects on the generalized mean and variance of the tariff distribution. Using these tools, we derive new results for welfare- and market-access-improving tariff changes, which imply two 'cones of liberalization' in price space. Because welfare is negatively but import volume positively related to the generalized variance, the cones do not intersect, which poses a dilemma for trade policy reform. Finally, we show that generalized and trade-weighted moments are mutually proportional when the trade expenditure function is CES.

Suggested Citation

Anderson, James E. and Neary, J. Peter, Welfare vs. Market Access: The Implications of Tariff Structure for Tariff Reform (September 2004). NBER Working Paper No. w10730, Available at SSRN: https://ssrn.com/abstract=587944

James E. Anderson (Contact Author)

Boston College - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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J. Peter Neary

University of Oxford - Department of Economics ( email )

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Centre for Economic Policy Research (CEPR)

London
United Kingdom

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