Working Paper: NBER ID: w3661
Authors: Arvind Panagariya; Dani Rodrik
Abstract: Uniform tariffs have become increasingly popular in recent years, yet their economic rationale is not strong. We identify and evaluate three sets of reasons as to why governments may prefer tariff uniformity as a means of alleviating political motives for excessive protection. First, a free-rider effect may be conducive to less lobbying under a uniform tariff regime than under a regime in which tariffs are allowed to differ. Second, an input-price effect may dampen the enthusiasm of final-goods producers for import protection. Third, a precommitment effect may increase the cost to a future government of protecting favored sectors. None of these arguments provides an unambiguous, airtight case for tariff uniformity. The decision on uniformity has to be made on a case-by-case basis.
Keywords: uniform tariff; political economy; trade policy
JEL Codes: F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| uniform tariffs (F13) | freerider effect (H40) |
| freerider effect (H40) | less lobbying (D72) |
| less lobbying (D72) | higher welfare (I31) |
| uniform tariffs (F13) | input-price effect (E31) |
| input-price effect (E31) | reduce enthusiasm for protection (F52) |
| reduce enthusiasm for protection (F52) | better economic outcomes (P17) |
| uniform tariffs (F13) | precommitment effect (D91) |
| precommitment effect (D91) | restrict government favoritism (L49) |
| restrict government favoritism (L49) | lower tariffs on preferred sectors (F13) |
| uniform tariffs (F13) | higher welfare (I31) |