Agoa and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?

15 Pages Posted: 15 Jan 2005

See all articles by Marcelo Olarreaga

Marcelo Olarreaga

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

Caglar Ozden

World Bank - Research Department

Abstract

The United States grants preferential (tariff- and quota-free) market access to a list of products from eligible countries in sub-Saharan Africa through the African Growth and Opportunity Act (AGOA). We analyse the increase in prices received by apparel exporters who benefited from AGOA preferences. In the presence of competitive markets, export prices should increase as much as the tariff which was previously collected by the US government. We refer to this price increase as the 'tariff preference rent' since exporters receive this income as the rent for their preferential status. The results show that exporters receive only one-third of this rent and smaller exporters receive less than larger and established ones. We then provide evidence that suggests this may be due to the degree of market power enjoyed by US importers when facing African exporters.

Suggested Citation

Olarreaga, Marcelo and Özden, Çaglar, Agoa and Apparel: Who Captures the Tariff Rent in the Presence of Preferential Market Access?. The World Economy, Vol. 28, No. 1, pp. 63-77, January 2005. Available at SSRN: https://ssrn.com/abstract=648752

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

Çaglar Özden

World Bank - Research Department ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

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

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