Trade Diversion and Antidumping Effectiveness: Insights from a Residual Demand Model

17 Pages Posted: 5 Apr 2017

See all articles by Henry W. Kinnucan

Henry W. Kinnucan

Auburn University

Nguyen Duc Minh

University of Stavanger

Dengjun Zhang

University of Stavanger

Date Written: April 2017

Abstract

A residual demand model is developed to predict the likely effects of an antidumping duty in the presence of trade diversion. A key insight is that the ability of an AD duty to increase the welfare of producers in the country imposing the duty hinges on the import supply elasticity for product from non‐named sources. The only instance in which this is not true is when supply for product from the named source is perfectly elastic. In this case, the welfare gain to domestic producers is maximised irrespective of the supply elasticity for imports from non‐named sources. A comparison of the residual demand model with the Armington model suggests the latter significantly understates both trade diversion and domestic producer gains from the duty.

Keywords: antidumping, Armington model, pass‐through elasticity, residual demand model, trade diversion, trade policy

Suggested Citation

Kinnucan, Henry W. and Duc Minh, Nguyen and Zhang, Dengjun, Trade Diversion and Antidumping Effectiveness: Insights from a Residual Demand Model (April 2017). Australian Journal of Agricultural and Resource Economics, Vol. 61, Issue 2, pp. 324-340, 2017, Available at SSRN: https://ssrn.com/abstract=2945750 or http://dx.doi.org/10.1111/1467-8489.12203

Henry W. Kinnucan (Contact Author)

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States

Nguyen Duc Minh

University of Stavanger

PB 8002
Stavanger, 4036
Norway

Dengjun Zhang

University of Stavanger ( email )

PB 8002
Stavanger, 4036
Norway

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