Optimal Tariffs and Market Power: The Evidence
American Economic Review
vol. 98,
no. 5, December 2008
(pp. 2032-65)
Abstract
We find that prior to World Trade Organization membership, countries set import tariffs 9 percentage points higher on inelastically supplied imports relative to those supplied elastically. The magnitude of this effect is similar to the size of average tariffs in these countries, and market power explains more of the tariff variation than a commonly used political economy variable. Moreover, US trade restrictions not covered by the WTO are significantly higher on goods where the United States has more market power. We find strong evidence that these importers have market power and use it in setting noncooperative trade policy. (JEL F12, F13)Citation
Broda, Christian, Nuno Limao, and David E. Weinstein. 2008. "Optimal Tariffs and Market Power: The Evidence." American Economic Review, 98 (5): 2032-65. DOI: 10.1257/aer.98.5.2032Additional Materials
JEL Classification
- F12 Models of Trade with Imperfect Competition and Scale Economies
- F13 Trade Policy; International Trade Organizations