Working Paper: CEPR ID: DP785
Authors: A. Lans Bovenberg; Frederick van der Ploeg
Abstract: In this paper we develop techniques for measuring the trade policy equivalent of domestic distortions, using a distance function approach. Our measure, the Trade Restrictiveness Index, is shown to equal the uniform tariff which is welfare-equivalent to a given pattern of domestic taxes and subsidies. We extend the Index to incorporate taxes on non-traded goods and factor markets and illustrate its operationality with an application to liberalization in Mexican agriculture. We conclude that our Index has considerable potential in empirical work and as an aid to trade negotiators.
Keywords: Environmental externalities; Natural resources; Public abatement; Employment; Capital; Small open economy; Excess burden
JEL Codes: E60; H21; H41
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased environmental concern (F64) | capital flight (F21) |
| Increased environmental concern (F64) | employment declines (J63) |
| Increased environmental taxes (H23) | lower wages (J31) |
| lower wages (J31) | reduced labor supply (J22) |
| Higher taxes on natural resources (H29) | capital flight (F21) |