Not all trade restrictions are created equally

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Title: Not all trade restrictions are created equally
Authors: Cole, Matthew T.
Permanent link: http://hdl.handle.net/10197/2642
Date: Apr-2010
Abstract: There has been great focus in the recent trade theory literature on the introduction of firm heterogeneity into trade models. This introduction has highlighted the importance of the entry/exit decision of firms in response to changes in trade barriers. However, it is typical in many of these models to use iceberg transport costs as a general form of trade barriers that can be interchangeable with ad valorem tariffs. I show that this is not always an appropriate conclusion. Specifically, I illustrate that profit for an exporter is more elastic in response to tariffs than iceberg transport costs, which has implications for total product variety. One such implication is the possibility for there to be an anti-variety effect associated with lower transport costs while there also being a pro-variety effect associated with lower tariffs.
Funding Details: Not applicable
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Keywords: Intra-industry tradeTrade policyFirm heterogeneityMonopolistic competition
Subject LCSH: Intra-industry trade--Econometric models
Commercial policy
Monopolistic competition
Other versions: http://www.ucd.ie/t4cms/wp10_09.pdf
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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