Working Paper: CEPR ID: DP12985
Authors: Giovanni Maggi; Monika Mrzova; Peter Neary
Abstract: Red-tape barriers (RTBs) are an important source of trade costs, but have received little scholarly attention to date. Here we examine the economic-political determinants of RTBs and their effects on trade. Because of their wasteful nature, RTBs have very different implications from those of more traditional trade barriers. In particular, RTBs have important impacts on the extensive margin of trade, and respond in non-standard ways to changes in tariffs and natural trade costs. We argue that taking into account the endogenous response of RTBs is crucial for understanding the effects of tariff liberalization and globalization on trade and welfare.
Keywords: International Trade; Policy; Nontariff Measures; Political Economy; Red Tape Barriers
JEL Codes: F13; D7; F55
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tariff liberalization (F13) | Increase in RTBs (E43) |
| Increase in RTBs (E43) | Contraction of trade (F19) |
| Decreasing natural trade costs (F12) | Decrease in likelihood of imports being choked by RTBs (F69) |
| Political motivations (D72) | Choice of RTBs (R50) |
| Anticipated use of RTBs (E43) | Optimal tariff commitments (F13) |