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Welfare‐ranking ad valorem and specific tariffs under monopolistic competition

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  • Jan G. Jørgensen
  • Philipp J.H. Schröder

Abstract

. Actual trade and tariff policy prefers ad valorem tariffs to specific tariffs. Yet in this paper we show that, in a setting of monopolistic competition, realizing a given restriction on imports via a specific tariff would generate more consumer utility than obtaining the same restriction via an ad valorem tariff. JEL classification: F12 Un classement en terme de bien‐être des droits de douane ad valorem et spécifiques quand on est en régime de concurrence monopolistique. Les politiques commerciales en vigueur préfèrent les droits de douane ad valorem aux droits de douane spécifiques. Or ce mémoire montre que, dans un contexte de concurrence monopolistique, réduire les importations par le truchement d’un droit de douane spécifique génère plus d’utilité pour le consommateur que les mêmes restrictions obtenues par le truchement d’un droit de douane ad valorem.

Suggested Citation

  • Jan G. Jørgensen & Philipp J.H. Schröder, 2005. "Welfare‐ranking ad valorem and specific tariffs under monopolistic competition," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(1), pages 228-241, February.
    • Handle: RePEc:wly:canjec:v:38:y:2005:i:1:p:228-241
    DOI: 10.1111/j.0008-4085.2005.00277.x
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    Cited by:

    1. Charlotte Emlinger & Viola Lamani, 2020. "International trade, quality sorting and trade costs: the case of Cognac," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 156(3), pages 579-609, August.
    2. Jørgensen, Jan G. & Schröder, Philipp J.H., 2008. "Fixed export cost heterogeneity, trade and welfare," European Economic Review, Elsevier, vol. 52(7), pages 1256-1274, October.
    3. Alexandra Ferreira-Lopes & Ccndida Sousa & Helena Carvalho & Nuno Crespo, 2017. "Trade Protectionism and Intra-industry Trade: A USA - EU Comparison," Research in World Economy, Research in World Economy, Sciedu Press, vol. 8(2), pages 88-102, December.
    4. Kala Krishna & Ling H. Tan, 2007. "Trade Policy with Heterogeneous Traders: Do Quotas Get a Bum Rap?," NBER Working Papers 13040, National Bureau of Economic Research, Inc.
    5. Philipp J. H. Schröder & Allan Sørensen, 2014. "A Welfare Ranking of Multilateral Reductions in Real and Tariff Trade Barriers when Firms are Heterogenous," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 423-443, August.
    6. Krishna, Kala & Tan, Ling Hui, 2010. "Trade policy with endogenous entry revisited," Journal of International Economics, Elsevier, vol. 80(2), pages 271-279, March.
    7. Shiou-Yen Chu & Tsaur-Chin Wu, 2023. "Ad valorem versus unit taxes on capital in a dynamic stochastic general equilibrium model," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 30(6), pages 1435-1456, December.
    8. Jan Guldager Jørgensen & Philipp J.H. Schröder, 2011. "Welfare Effects of Tariff Reduction Formulas," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 664-673, September.
    9. Dina Kassab, 2020. "Tax Exemptions of Ethical Products Revisited," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 77(2), pages 423-447, October.
    10. Hiroshi Aiura & Hikaru Ogawa, 2019. "Indirect taxes in a cross-border shopping model: a monopolistic competition approach," Journal of Economics, Springer, vol. 128(2), pages 147-175, October.
    11. Laszlo Goerke, 2011. "Commodity tax structure under uncertainty in a perfectly competitive market," Journal of Economics, Springer, vol. 103(3), pages 203-219, July.
    12. Ederington, Josh & McCalman, Phillip, 2013. "Technology adoption, government policy and tariffication," Journal of International Economics, Elsevier, vol. 90(2), pages 337-347.
    13. Aiura, Hiroshi & Ogawa, Hikaru, 2013. "Unit tax versus ad valorem tax: A tax competition model with cross-border shopping," Journal of Public Economics, Elsevier, vol. 105(C), pages 30-38.
    14. Halis Murat Yildiz, 2014. "Hub and spoke trade agreements under oligopoly with asymmetric costs," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 23(1), pages 97-110, February.
    15. Jürgen Bitzer & Holger Görg & Philipp J.H. Schröder, 2012. "Can Trade Really Hurt? An Empirical Follow-Up On Samuelson'S Controversial Paper," Economic Inquiry, Western Economic Association International, vol. 50(3), pages 724-738, July.
    16. Ederington,Josh & Ruta,Michele, 2016. "Non-tariff measures and the world trading system," Policy Research Working Paper Series 7661, The World Bank.
    17. Haraguchi Junichi & Ogawa Hikaru, 2018. "Leadership in Tax Competition with Fiscal Equalization Transfers," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 18(3), pages 1-15, July.
    18. Iwaisako, Tatsuro, 2019. "Welfare analysis of uniform entry tax in a general equilibrium model with heterogeneous industries," Economics Letters, Elsevier, vol. 178(C), pages 54-57.
    19. Lücke Dorothea & Schröder Philipp J.Η. & Schumacher Dieter, 2005. "A Note on R&D and Price Elasticity of Demand," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 225(6), pages 688-698, December.
    20. Hong Hwang & Chao-Cheng Mai & Ya-Po Yang, 2015. "Specific vs Ad Valorem Strategic Export Subsidies with Taxation Distortion," Review of Development Economics, Wiley Blackwell, vol. 19(4), pages 820-828, November.
    21. Susanne Dröge & Philipp J. H. Schröder, 2005. "Corrective Ad Valorem and Unit Taxes: A Welfare Comparison," Discussion Papers of DIW Berlin 534, DIW Berlin, German Institute for Economic Research.
    22. Durceylan, Esra, 2012. "Relative efficiency of specific and ad-valorem tariffs in a model of monopolistic competition," Economics Letters, Elsevier, vol. 117(3), pages 874-877.

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

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