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Discussion Paper Details

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Title: Domestic Distortions and International Trade

Author(s): James E Anderson and J Peter Neary

Publication Date: June 1993

Keyword(s): Consumer Subsidy, Domestic Distortions, Producer Subsidy, Trade Policy and Trade Restrictiveness Index

Programme Area(s): International Trade and Regional Economics

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.

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Bibliographic Reference

Anderson, J and Neary, J. 1993. 'Domestic Distortions and International Trade'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=786