Working Paper: NBER ID: w24739
Authors: Giovanni Maggi; Monika Mrzov; 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: red tape barriers; trade costs; political economy; tariff liberalization; globalization
JEL Codes: D72; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Tariff reductions (F13) | increase RTBs (R49) |
| increase RTBs (R49) | decrease number of imported varieties (Q17) |
| Tariff reductions (F13) | decrease number of imported varieties (Q17) |
| reduction in natural trade costs (F12) | decrease RTBs (E52) |
| decrease RTBs (E52) | increase trade at the extensive margin (F10) |
| natural trade costs (F19) | RTBs (R33) |