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Welfare Effects of Tariff Peak Conversion: The Case of Monopolistic Competition

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WTO negotiations have introduced formula approaches to reduce protection and improve market access. It has been argued that formula approaches are needed even more in current and future negotiations to secure success due to the large number of countries involved in the negotiations, the wider dispersion in initial tariffs (tariff peaks) and gaps between bound and applied tariff rates. This paper presents a general equilibrium model with monopolistic competition to examine the welfare effects of different formulas in a process of improving market access. Products with initially high and low tariffs are analyzed. It is established that reduction in the trade restriction using three formulas proposed in the literature i) a proportional cut, ii) the Swiss formula and iii) a compression formula leads to non-trivial impacts on the welfare.
Original languageEnglish
Publication year2005
Publication statusPublished - 2005
EventScottish Economic Society Annual Conference -
Duration: 29 Mar 200531 Mar 2005


ConferenceScottish Economic Society Annual Conference

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ID: 32336710