[go: up one dir, main page]
More Web Proxy on the site http://driver.im/
IDEAS home Printed from https://ideas.repec.org/p/zbw/tuewef/53.html
   My bibliography  Save this paper

Icebergs versus tariffs: A quantitative perspective on the gains from trade

Author

Listed:
  • Felbermayr, Gabriel
  • Jung, Benjamin
  • Larch, Mario
Abstract
Recent quantitative trade models treat import tariffs as pure cost shifters so that their effects are similar to iceberg trade costs. We introduce revenue-generating import tariffs, which act as demand shifters, into the framework of Arkolakis, Costinot and Rodriguez-Clare (2012), and generalize their gains from trade equation. Our formula permits easy quantification based on countries' observed degrees of openness, tariff revenues, and on the gravity elasticities of tariffs and icebergs. Export selection drives a wedge between these two elasticities and matters for welfare gains. However, in all model variants, an analysis based on iceberg costs necessarily underestimates the true gains from trade relative to autarky. Our quantitative exercise suggests that the bias can be numerically significant. For countries with relatively high tariffs, our formula predicts 30-60% larger gains from trade when iceberg trade costs and/or tariffs are liberalized as compared to a pure reduction of iceberg trade costs.

Suggested Citation

  • Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2013. "Icebergs versus tariffs: A quantitative perspective on the gains from trade," University of Tübingen Working Papers in Business and Economics 53, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    • Handle: RePEc:zbw:tuewef:53
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/72254/1/741295857.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Chris Edmond & Virgiliu Midrigan & Daniel Yi Xu, 2011. "Competition , Markups, and the Gains from," Department of Economics - Working Papers Series 1183, The University of Melbourne, revised 2014.
    2. Thomas Chaney, 2008. "Distorted Gravity: The Intensive and Extensive Margins of International Trade," American Economic Review, American Economic Association, vol. 98(4), pages 1707-1721, September.
    3. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2011. "Structural estimation and solution of international trade models with heterogeneous firms," Journal of International Economics, Elsevier, vol. 83(2), pages 95-108, March.
    4. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    5. Chris Edmond & Virgiliu Midrigan & Daniel Yi Xu, 2015. "Competition, Markups, and the Gains from International Trade," American Economic Review, American Economic Association, vol. 105(10), pages 3183-3221, October.
    6. Demidova, Svetlana & Rodríguez-Clare, Andrés, 2009. "Trade policy under firm-level heterogeneity in a small economy," Journal of International Economics, Elsevier, vol. 78(1), pages 100-112, June.
    7. Neary, J. Peter, 1994. "Cost asymmetries in international subsidy games: Should governments help winners or losers?," Journal of International Economics, Elsevier, vol. 37(3-4), pages 197-218, November.
    8. Matthieu Crozet & Pamina Koenig, 2010. "Structural gravity equations with intensive and extensive margins," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 43(1), pages 41-62, February.
    9. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    10. Balistreri, Edward J. & Markusen, James R., 2009. "Sub-national differentiation and the role of the firm in optimal international pricing," Economic Modelling, Elsevier, vol. 26(1), pages 47-62, January.
    11. Gros, Daniel, 1987. "A note on the optimal tariff, retaliation and the welfare loss from tariff wars in a framework with intra-industry trade," Journal of International Economics, Elsevier, vol. 23(3-4), pages 357-367, November.
    12. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2013. "Optimal tariffs, retaliation, and the welfare loss from tariff wars in the Melitz model," Journal of International Economics, Elsevier, vol. 89(1), pages 13-25.
    13. Philipp J. H. Schröder & Allan Sørensen, 2014. "A Welfare Ranking of Multilateral Reductions in Real and Tariff Trade Barriers when Firms are Heterogenous," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 423-443, August.
    14. Ossa, Ralph, 2015. "Why trade matters after all," Journal of International Economics, Elsevier, vol. 97(2), pages 266-277.
    15. Costas Arkolakis & Svetlana Demidova & Peter J. Klenow & Andres Rodriguez-Clare, 2008. "Endogenous Variety and the Gains from Trade," American Economic Review, American Economic Association, vol. 98(2), pages 444-450, May.
    16. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
    17. Alvarez, Fernando & Lucas, Robert Jr., 2007. "General equilibrium analysis of the Eaton-Kortum model of international trade," Journal of Monetary Economics, Elsevier, vol. 54(6), pages 1726-1768, September.
    18. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    19. Matthew T Cole, 2011. "Distorted Trade Barriers," Working Papers 201105, School of Economics, University College Dublin.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Povilas Lastauskas, 2013. "Europe’s Revolving Doors: Import Competition and Endogenous Firm Entry InstitutionS," Cambridge Working Papers in Economics 1360, Faculty of Economics, University of Cambridge.
    2. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    3. Lorenzo Caliendo & Robert C. Feenstra & John Romalis & Alan M. Taylor, 2015. "Tariff Reductions, Entry, and Welfare: Theory and Evidence for the Last Two Decades," NBER Working Papers 21768, National Bureau of Economic Research, Inc.
    4. Gabriel Felbermayr & Mario Larch & Gabriel J. Felbermayr, 2013. "The Transatlantic Trade and Investment Partnership (TTIP): Potentials, Problems and Perspectives," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(02), pages 49-60, August.
    5. Haaland, Jan I. & Venables, Anthony J., 2016. "Optimal trade policy with monopolistic competition and heterogeneous firms," Journal of International Economics, Elsevier, vol. 102(C), pages 85-95.
    6. Kohler Wilhelm & Jung Benjamin, 2017. "Wie vorteilhaft ist internationaler Handel?: Ein neuer Ansatz zur Vermessung der Gewinne," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 18(1), pages 32-55, April.
    7. Gabriel Felbermayr & Mario Larch, 2013. "The Transatlantic Trade and Investment Partnership (TTIP): Potentials, Problems and Perspectives," CESifo Forum, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 14(2), pages 49-60, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2015. "The welfare consequences of import tariffs: A quantitative perspective," Journal of International Economics, Elsevier, vol. 97(2), pages 295-309.
    2. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    3. Felbermayr, Gabriel & Jung, Benjamin & Larch, Mario, 2012. "Tariffs and welfare in new trade theory models," University of Tübingen Working Papers in Business and Economics 41, University of Tuebingen, Faculty of Economics and Social Sciences, School of Business and Economics.
    4. Kohler Wilhelm & Jung Benjamin, 2017. "Wie vorteilhaft ist internationaler Handel?: Ein neuer Ansatz zur Vermessung der Gewinne," Perspektiven der Wirtschaftspolitik, De Gruyter, vol. 18(1), pages 32-55, April.
    5. Balistreri, Edward J. & Hillberry, Russell H. & Rutherford, Thomas F., 2011. "Structural estimation and solution of international trade models with heterogeneous firms," Journal of International Economics, Elsevier, vol. 83(2), pages 95-108, March.
    6. Melitz, Marc J. & Redding, Stephen J., 2014. "Heterogeneous Firms and Trade," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 1-54, Elsevier.
    7. Head, Keith & Mayer, Thierry, 2014. "Gravity Equations: Workhorse,Toolkit, and Cookbook," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 131-195, Elsevier.
    8. Bolatto, Stefano & Moramarco, Graziano, 2023. "Gains from trade and their quantification: Does sectoral disaggregation matter?," International Economics, Elsevier, vol. 174(C), pages 44-68.
    9. Nocco, Antonella & Ottaviano, Gianmarco I.P. & Salto, Matteo, 2019. "Geography, competition, and optimal multilateral trade policy," Journal of International Economics, Elsevier, vol. 120(C), pages 145-161.
    10. Kristian Behrens & Giordano Mion & Yasusada Murata & Jens Südekum, 2014. "Trade, Wages, And Productivity," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55(4), pages 1305-1348, November.
    11. Philipp J. H. Schröder & Allan Sørensen, 2014. "A Welfare Ranking of Multilateral Reductions in Real and Tariff Trade Barriers when Firms are Heterogenous," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 423-443, August.
    12. Edward J. Balistreri & David G. Tarr, 2022. "Welfare gains in the Armington, Krugman and Melitz models: Comparisons grounded on gravity," Economic Inquiry, Western Economic Association International, vol. 60(4), pages 1681-1703, October.
    13. Federico Esposito, 2016. "Risk Diversification and International Trade," 2016 Meeting Papers 302, Society for Economic Dynamics.
    14. repec:hal:wpspec:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    15. Holger Breinlich & Alejandro Cuñat, 2016. "Tariffs, Trade and Productivity: A Quantitative Evaluation of Heterogeneous Firm Models," Economic Journal, Royal Economic Society, vol. 126(595), pages 1660-1702, September.
    16. repec:hal:spmain:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    17. repec:spo:wpecon:info:hdl:2441/dambferfb7dfprc9m01g1j1k2 is not listed on IDEAS
    18. Dudley Cooke, 2016. "Optimal Monetary Policy with Endogenous Export Participation," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 21, pages 72-88, July.
    19. Mario Larch & Yoto V. Yotov, 2016. "General Equilibrium Trade Policy Analysis with Structural Gravity," CESifo Working Paper Series 6020, CESifo.
    20. Caliendo, Lorenzo & Feenstra, Robert C., 2024. "Foundation of the small open economy model with product differentiation," Journal of International Economics, Elsevier, vol. 150(C).
    21. Arnaud Costinot & Dave Donaldson & Jonathan Vogel & Iván Werning, 2015. "Comparative Advantage and Optimal Trade Policy," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(2), pages 659-702.
    22. Patrick Alexander, 2016. "Producer Heterogeneity, Value-Added, and International Trade," Staff Working Papers 16-54, Bank of Canada.
    23. Alexander, Patrick D. & Keay, Ian, 2018. "A general equilibrium analysis of Canada’s national policy," Explorations in Economic History, Elsevier, vol. 68(C), pages 1-15.

    More about this item

    Keywords

    Gravity Equation; Monopolistic Competition; Heterogeneous Firms; Armington Model; International Trade; Trade Policy; Gains from Trade;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:tuewef:53. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/wftuede.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.