Trade Policy with Heterogeneous Traders: Do Quotas Get a Bum Rap?
April 1, 2007
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Summary
This paper considers the effects of trade policy-tariffs and quotas-when importing is done by competitive traders who are identical ex ante but differ ex post. We show that the standard equivalence results no longer hold and the conventional ranking of tariffs and quotas is turned on its head: quotas are not as bad for welfare as previously believed, while tariffs may restrict trade by more than originally intended. Furthermore, the allocation of property rights (quota licenses) has real effects beyond the distribution of rents; this, in turn, has implications for the effects of corruption on welfare.
Subject: Import quotas, Imports, International trade, Tariffs, Taxes, Trade liberalization, Trade policy
Keywords: Asia and Pacific, auction quota, average cost, entry, firm heterogeneity, free trade, free trade equilibrium, import equivalent, Import quotas, Imports, license price, market clearing price, quota allocation scheme, quota license, quota rent, quotas, specific tariff, supply price, tariffs, Trade liberalization, trade policy, WP
Pages:
29
Volume:
2007
DOI:
Issue:
092
Series:
Working Paper No. 2007/092
Stock No:
WPIEA2007092
ISBN:
9781451866568
ISSN:
1018-5941
