Does Tariff Liberalization Kick the Good Apples Out? Theory and Evidence

40 Pages Posted: 24 Oct 2010

See all articles by Alan Spearot

Alan Spearot

University of California, Santa Cruz

Date Written: June 30, 2010

Abstract

This paper examines the liberalization of a common tariff when imported varieties vary in quality and cost. Varieties of higher quality and/or lower cost (a) are imported at lower absolute demand elasticities and (b) earn higher revenues. By virtue of larger demand elasticities, low revenue varieties benefit the most from tariff liberalization. Further, if varieties are substitutable, low revenue varieties may benefit at the expense of high revenue varieties. These predictions are confirmed using a case study of US Uruguay Round tariff cuts, where within products, low revenue exporters experienced large gains, and high revenue exporters experienced negligible gains.

Keywords: Firm Heterogeneity, Trade Liberalization, Quality, WTO, Nondiscrimination

JEL Classification: F12, F13, F14

Suggested Citation

Spearot, Alan, Does Tariff Liberalization Kick the Good Apples Out? Theory and Evidence (June 30, 2010). Available at SSRN: https://ssrn.com/abstract=1695723 or http://dx.doi.org/10.2139/ssrn.1695723

Alan Spearot (Contact Author)

University of California, Santa Cruz ( email )

1156 High St
Santa Cruz, CA 95064
United States

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