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Real versus tariff liberalization: a welfare comparison under monopolistic competition

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A distinction between real trade costs (e.g. administration, border formalities, transport costs) and tariff costs is introduced into a standard monopolistic competition trade model. Driven by the number of firms, welfare under real trade barriers turns out to be lower than under an equivalent tariff barrier. Based on this finding, the paper shows that integration or rather liberalization measures (generating a certain increase in world trade) that reduce real trade barriers generate a larger welfare gain than integration consisting of a reduction in tariffs.
Udgivelsesdato: OCT
Original languageEnglish
JournalOpen Economies Review
Volume15
Issue4
Pages (from-to)403-418
Number of pages16
ISSN0923-7992
Publication statusPublished - 2004

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