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Domestic distortions and international trade

By J. Anderson and J. P. Neary

Abstract

In this paper, we investigate 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 in markets for non-traded goods and factors of production and illustrates its operationality with an application to liberalisation in Mexican agriculture. We conclude that our Index has considerable potential in empirical work and as an aid to trade negotiations

Topics: HF Commerce
Publisher: Centre for Economic Performance, London School of Economics and Political Science
Year: 1993
OAI identifier: oai:eprints.lse.ac.uk:20926
Provided by: LSE Research Online
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