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Tariff rates in gravity

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  • Kazunobu Hayakawa
  • Taiyo Yoshimi

Abstract

This paper considers the case where multiple tariff schemes (e.g. general and preferential schemes) are available between trading countries. We incorporate these tariffs into gravity equations and estimate them by the Pseudo-Poisson maximum likelihood technique. The results show that omitting either tariff type leads to significant estimates biases. If fixed effects to control other tariffs are not included in the model, both preferential and general tariffs are to be introduced in the gravity equation. Indeed, some estimation results for precision metals show that reducing both types of tariffs contributes to significantly increasing trade values. However, reducing general tariffs does not always have a trade-enhancing effect. In leather products, for example, its impact was insignificant. Nevertheless, the reduction of preferential tariffs was again found to increase trade values significantly.

Suggested Citation

  • Kazunobu Hayakawa & Taiyo Yoshimi, 2024. "Tariff rates in gravity," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 33(8), pages 1477-1494, November.
    • Handle: RePEc:taf:jitecd:v:33:y:2024:i:8:p:1477-1494
    DOI: 10.1080/09638199.2023.2277779
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    Cited by:

    1. ANDO Mitsuyo & URATA Shujiro & YAMANOUCHI Kenta, 2022. "Effects of Product-Specific Rules of Origin on Trade in Free Trade Agreements: Evidence from the cases of Japan," Discussion papers 22035, Research Institute of Economy, Trade and Industry (RIETI).
    2. Chuc Dinh Nguyen & Kazunobu Hayakawa, 2024. "The Substitution Effect of Preferential Tariffs on Nontariff Measures: Evidence from Vietnam," The Developing Economies, Institute of Developing Economies, vol. 62(1), pages 87-103, March.

    More about this item

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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