The optimal tariff in the presence of trade-induced productivity gains

Arbeitspapier

We scrutinize the impact of international productivity gains (spillovers) induced by imports and exports on optimal tariffs. First, we solve a stylized 2x2 trade model of a large open economy and show that (a) productivity gains via exports and imports both reduce the strategically optimal tariff, (b) there exists a certain strength of productivity gains such that the incentive to manipulate the terms of trade strategically vanishes, (c) the welfare gain that can be achieved via a tariff is lower in the presence of productivity gains than in their absence, and (d) these results even hold without power on international markets. Second, we apply this model to a panel data set covering 40 countries, 29 sectors and the years 1995 to 2009. We find that importdriven productivity gains are stronger than export-driven productivity gains. Third, we extend our 2x2 model to a multi-region, multi-sector model that we calibrate to the data set used in the econometric analysis and to the econometrically estimated productivity gains. Optimal tariffs are reduced by 17% for the US and China and 40% for Brazil when taking trade-induced productivity gains into account. The USA are the only model region that gains from European optimal tariff policy. Thus, trade-induced productivity gains have empirically relevant effects on optimal tariffs.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ZEW Discussion Papers ; No. 13-103

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; Empirical Studies of Trade ; Trade: Forecasting and Simulation ; Technological Change: Choices and Consequences; Diffusion Processes ; Economic Growth and Aggregate Productivity: General
• Subject: trade ; optimal tariff ; productivity gains ; technology spillovers

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Hübler, Michael ; Pothen, Frank
• Event: Veröffentlichung
• (who): Zentrum für Europäische Wirtschaftsforschung (ZEW)
• (where): Mannheim
• (when): 2013

Further information

• Handle: http://hdl.handle.net/10419/88134
• URN: urn:nbn:de:bsz:180-madoc-352776
• Last update: 10.03.2025, 11:43 AM CET