Import Demand Elasticities and Trade Distortions

38 Pages Posted: 8 Dec 2004

See all articles by Marcelo Olarreaga

Marcelo Olarreaga

University of Geneva; Centre for Economic Policy Research (CEPR)

Hiau Looi Kee

World Bank - Development Research Group (DECRG)

Alessandro Nicita

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2004

Abstract

To study the effects of tariffs on GDP, one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. These do not exist. We modify Kohli's (1991) GDP function approach to estimate demand elasticities for 4625 imported goods in 117 countries. Following Anderson and Neary (1992, 1994) and Feenstra (1995), we use these estimates to construct theoretically-sound trade restrictiveness indices (TRIs) and GDP losses associated with existing tariff structures. Countries are revealed to be 30% more restrictive than their simple or import-weighted average tariffs would suggest. Thus, distortion is nontrivial. GDP losses are the largest in the United States, China, India, Mexico and Germany.

Keywords: Import demand elasticities, GDP function, trade restrictiveness, deadweight loss

JEL Classification: F10, F13

Suggested Citation

Olarreaga, Marcelo and Kee, Hiau Looi and Nicita, Alessandro, Import Demand Elasticities and Trade Distortions (October 2004). Available at SSRN: https://ssrn.com/abstract=631625

Marcelo Olarreaga (Contact Author)

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Hiau Looi Kee

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-4155 (Phone)
202-522-1159 (Fax)

HOME PAGE: http://econ.worldbank.org/staff/hkee

Alessandro Nicita

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
MSN3-311
Washington, DC 20433
United States
202-473-4066 (Phone)
202-522-1159 (Fax)

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