Premium
Local Content Requirements Versus Tariff Equivalents: How We Measure Matters
Author(s) -
Flaig Dorothee,
Stone Susan F.
Publication year - 2017
Publication title -
the world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.594
H-Index - 68
eISSN - 1467-9701
pISSN - 0378-5920
DOI - 10.1111/twec.12426
Subject(s) - economics , tariff , value (mathematics) , measure (data warehouse) , econometrics , content (measure theory) , microeconomics , international economics , computer science , mathematics , statistics , mathematical analysis , database
This article develops a mechanism to measure the impact of local content requirements as quantitative restrictions. We compare effects of the novel quantitative approach to the effects of a tariff equivalent, which is more traditionally used to analyse these types of policies. Local content requirements increase output and value added in the affected sector, but at the expense of other sectors, leading to declines in GDP and trade across the economy. Comparing the two modelling approaches, the differences in outcomes are shown to be significant.