Economic Issues in Tariffication: An Overview

Tariffication is an effort to convert all existing agricultural nontariff barriers (NTBs) to trade into bound tariffs and to reduce these tariffs over time. The main economic issues that arise with tariffication stem from the nonequivalence of tariffs in NTBs in a number of scenarios. This paper analyzes nonequivalence arising from the existence of imperfect competition in importing countries, price instability in importing and exporting countries, and inefficient allocation of quantitative restrictions. It is shown that in all these cases the definition of an appropriate equivalent tariff to be used in tariffication is not straightforward, and that in general this equivalent tariff cannot be computed on the basis of only observed price differences between countries

Trade uncertainty and the two-step procedure: The choice of numeraire and exact indexation

In a small open economy it is optimal to first maximize national income and second choose the best consumption point. The same two-step procedure under (quantitative) uncertainty is suboptimal if one of the goods is used as numéraire. Optimality is restored however, if nominal prices are deflated by the exact price index. Hence there is equivalence between the appropriate two-step procedure and the introduction of a stock market under uncertainty (Diamond 1967) under ideal circumstances

Economic growth in India during 1950-2015:Nehruvian socialism to market capitalism

Comparisons of pre and postreform economic growth in India are widely researched in the literature. This paper adds to this literature, but with a sectoral growth accounting perspective. We compare the proximate sources of economic growth in India during the 1950-1980 periods, the so-called Nehruvian socialist regime, with that of the post-1980 period, which includes the pro-business reforms in the 1980s and more aggressive pro-market reforms in the 1990s. We document two important features of India's growth dynamics. First, the overriding importance of the services sector in India's growth is not new, but it has always been the case in independent India. However, there has been a major shift in the composition of service sector growth. While the socialist regime fostered more nonmarket services, including the government sector, the market services sector flourished in the market regime, in terms of labour productivity, TFP and economic growth. Second, the economic growth in the socialist period was substantially driven by capital accumulation, except in the nonmarket services, whereas the market regime sees a combination of both productivity and capital accumulation

National welfare in an open economy in the presence of foreign-owned factors of production

In the presence of foreign-owned factors of production in the economy, the effect of trade policy changes on national welfare needs to take into account the possible redistributive effect between foreign-owned and domestic factors. Therefore, an otherwise welfare-improving trade liberalization may paradoxically worsen national welfare. This paper analyzes this important, new area of trade theory and establishes the condition under which this paradox of immiserizing trade liberalization arises. The analysis is also applicable to analyzing the effects of external tariff variation in customs unions, with full internal factor mobility, on member countries' welfare

Immiserizing transfers from abroad

This paper shows that an international transfer payment may paradoxically immiserize the recipient country (or increase the donor country's welfare), even when world markets are stable, despite the traditional view that such a paradox theoretically requires market instability. To demonstrate this paradoxical possibility, the paper extends the conventional trade-theoretic analysis to admit exogenous distortions created by tax-cum-subsidies in domestic production, or endogenous distortions due to 'additionality' requirements imposed by the donor on the recipient. This analysis of immiserizing transfers from abroad immediately suggests significant implications for important policy issues, including the evaluation of real benefits from foreign aid