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Not all trade restrictions are created equally
Author(s)
Date Issued
2010-04
Date Available
2010-12-09T15:20:55Z
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.
Sponsorship
Not applicable
Type of Material
Working Paper
Publisher
University College Dublin. School of Economics
Series
UCD Centre for Economic Research Working Paper Series
WP 10 09
Classification
F10
F13
F15
Subject – LCSH
Intra-industry trade--Econometric models
Commercial policy
Monopolistic competition
Web versions
Language
English
Status of Item
Not peer reviewed
This item is made available under a Creative Commons License
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