Are All Trade Protection Policies Created Equal? Empirical Evidence for Nonequivalent Market Power Effects of Tariffs and Quotas
35 Pages Posted: 9 Oct 2010
Date Written: September 1, 2010
The steel industry has been protected by a wide variety of trade policies, both tariff- and quota-based, over the past decades. This extensive heterogeneity in trade protection provides the opportunity to examine the well-established theoretical literature predicting nonequivalent effects of tariffs and quotas on domestic firms' market power. Robust to a variety of empirical specifications with U.S. Census data on the population of U.S. steel plants from 1967-2002, we find evidence for significant market power effects for binding quota-based protection, but not for tariff-based protection. There is only weak evidence that antidumping protection increases market power.
Keywords: Market structure, Nonequivalence of tariffs and quotas, VRAs, Antidumping, Mini-mills
JEL Classification: F13, F23, L11
Suggested Citation: Suggested Citation