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Effects of Tariffication: Tariffs, Quotas and VERs under Monopolistic Competition

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

Abstract

Recent rounds of GATT and later WTO have advocated widespread tariffication, meaning that existing non-tariff barriers be converted into import equivalent tariffs. From an economic point of view, the effects of such tariffication are not entirely clear. The paper presents a general equilibrium model with monopolistic competition to examine the welfare effects of tariffication. The ranking of pre- and post-tariffication welfare depends crucially on the nature of the initial trade barrier and the tariff tool applied. Tariffication using a specific (an ad valorem) tariff results in the same (a reduced) welfare level compared to an initial quota, whereas welfare is increased (the same) compared to an initial VER.

Suggested Citation

  • Jan G. Jorgensen & Philipp J. H. Schröder, 2002. "Effects of Tariffication: Tariffs, Quotas and VERs under Monopolistic Competition," Discussion Papers of DIW Berlin 269, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwwpp:dp269
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    References listed on IDEAS

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    More about this item

    Keywords

    Trade policy; tariffication; specific tariff; ad valorem tariff; quota; VER;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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