Market Access and Welfare: Is There a Conflict?

10 Pages Posted: 16 Jan 2015

See all articles by Pascalis Raimondos

Pascalis Raimondos

Queensland University of Technology - School of Economics and Finance; Copenhagen Business School - Department of Economics; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Alan D. Woodland

University of New South Wales

Date Written: December 30, 2014

Abstract

According to the literature, well known tariff reform rules that are guaranteed to increase welfare will not necessarily increase market access, while rules that are guaranteed to increase market access will not necessarily increase welfare. Such conflict between welfare and market access objectives of trade policy is problematic and calls for finding alternative tariff reform rules that can achieve both objectives at the same time. The present paper contributes to this aim by using a new set of tariff reforms that are based on local optimality. Using such reforms it is shown that market access and consumer welfare will always be weakly compatible, in the sense that reforms based on each objective have the same signed effect on the other objective. For strong compatibility, whereby both objectives increase as a result of a locally optimal tariff reform, we derive both a necessary and sufficient condition and a simple sufficient condition.

Keywords: piecemeal tariff policy, locally optimal reforms, market access

JEL Classification: F150

Suggested Citation

Raimondos, Pascalis and Woodland, Alan D., Market Access and Welfare: Is There a Conflict? (December 30, 2014). CESifo Working Paper Series No. 5136, Available at SSRN: https://ssrn.com/abstract=2550135

Pascalis Raimondos (Contact Author)

Queensland University of Technology - School of Economics and Finance ( email )

GPO Box 2434
2 George Street
Brisbane, Queensland 4001
Australia

Copenhagen Business School - Department of Economics ( email )

Solbjergs Plads 3
DK-2000 Frederiksberg C
Denmark
+45 38 152 594 (Phone)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Alan D. Woodland

University of New South Wales ( email )

School of Economics
Sydney, NSW 2052
Australia
61293859707 (Phone)
61293136337 (Fax)

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