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The Mercantilist Index of Trade Policy*
Author(s) -
Anderson James E.,
Neary J. Peter
Publication year - 2003
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.t01-1-00083
Subject(s) - economics , tariff , restrictiveness , index (typography) , mercantilism , commercial policy , international economics , welfare , terms of trade , benchmark (surveying) , trade barrier , general equilibrium theory , volume (thermodynamics) , econometrics , macroeconomics , computer science , market economy , linguistics , philosophy , physics , geodesy , quantum mechanics , world wide web , geography
We introduce an index of trade policy restrictiveness defined as the uniform tariff that maintains the same trade volume as a given tariff/quota structure. Our index overcomes the problems of the trade‐weighted average tariff: It avoids substitution bias, correctly accounts for general equilibrium transfers, and takes import volume instead of welfare as benchmark. Empirical applications to international cross section and time‐series comparisons of trade policy confirm our theoretical results: Trade‐weighted average tariffs generally underestimate the true height of tariffs as measured by the trade‐volume‐equivalent index; this in turn always underestimates the welfare‐equivalent index.