Relationship between Custom Duties and Profitability of Automobile Industry: A Cross Country Analysis.

Abstract

This paper investigates how import duties across different part of the world influence the profitability of automobile sectors of their respected countries across the globe. Mostly developing countries are taken under observation where automobiles are imported from outside the home country. Import duties are used as a main independent variable while other independent variables used are Interest rates, Unemployment rates, Inflation rates and GDP growth rates. Number of passenger cars sold in the country was taken as representative for the profitability of the country’s automobile sector. A data set of automobile sector of the selected 50 countries of the world was analyzed using multiple regression. The findings of the result shows a negative relation between custom duties and profitability of automobile sector in a country. This result will benefit researchers to study the impact over the entire automobile industry. Government can use this study to formulate better trade policies and improve the automotive industry in Pakistan.

Keywords: Profitability, Custom Tariff, Interest Rate, Inflation Rate, Unemployment Rate, Gross Domestic Product per Capita