DP5888 Concertina Reforms with International Capital Mobility

Author(s): Udo Kreickemeier, Pascalis Raimondos
Publication Date: October 2006
Keyword(s): international factor mobility, market access, trade policy reform, welfare
JEL(s): F11, F13, F15
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5888

We show that the standard concertina result for tariff reforms -- i.e. lowering the highest tariff increases welfare -- no longer holds in general if we allow for international capital mobility. The result can break down if the good whose tariff is lowered is not capital intensive. If the concertina reform lowers welfare it lowers market access as well, thereby compromising a second goal that is typically connected with trade liberalisation.