Working Paper: CEPR ID: DP5888
Authors: Udo Kreickemeier; Pascalis Raimondos-Moller
Abstract: We show that the standard concertina result for tariff reforms -- i.e. lowering the highest tariff increases welfare -- no longer holds in general if we allow for international capital mobility. The result can break down if the good whose tariff is lowered is not capital intensive. If the concertina reform lowers welfare it lowers market access as well, thereby compromising a second goal that is typically connected with trade liberalisation.
Keywords: international factor mobility; market access; trade policy reform; welfare
JEL Codes: F11; F13; F15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lowering the highest tariff (F13) | decrease in welfare (I38) |
| decrease in welfare (I38) | decrease in market access (F69) |
| lowering the highest tariff (F13) | capital inflows (F21) |
| capital inflows (F21) | affect overall import values (F69) |