Import Demand Elasticities and Trade Distortions

37 Pages Posted: 17 Sep 2004

See all articles by Hiau Looi Kee

Hiau Looi Kee

World Bank - Development Research Group (DECRG)

Marcelo Olarreaga

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

Alessandro Nicita

World Bank - Development Research Group (DECRG)

Multiple version iconThere are 2 versions of this paper

Date Written: August 2004

Abstract

To study the effects of tariffs on gross domestic product (GDP), one needs import demand elasticities at the tariff line level that are consistent with GDP maximization. These do not exist. Kee, Nicita, and Olarreaga modify Kohli's (1991) GDP function approach to estimate demand elasticities for 4,625 imported goods in 117 countries. Following Anderson and Neary (1992, 1994) and Feenstra (1995), they use these estimates to construct theoretically sound trade restrictiveness indices and GDP losses associated with existing tariff structures. Countries are revealed to be 30 percent more restrictive than their simple or import-weighted average tariffs would suggest. Thus, distortion is nontrivial. GDP losses are largest in China, Germany, India, Mexico, and the United States.

This paper - a product of the Trade Team, Development Research Group - is part of a larger effort in the group to measure trade restrictiveness.

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

JEL Classification: F1, F10, F13

Suggested Citation

Kee, Hiau Looi and Olarreaga, Marcelo and Nicita, Alessandro, Import Demand Elasticities and Trade Distortions (August 2004). Available at SSRN: https://ssrn.com/abstract=590925

Hiau Looi Kee (Contact Author)

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

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

Marcelo Olarreaga

University of Geneva ( email )

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

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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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