Optimal Tariffs and Market Power: The Evidence

By Christian M. Broda, N. Limão, David E. Weinstein. World Scientific Studies in International Economics, 2008

283 citations recorded by the source corpus.

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)

Subfields: Economics and Econometrics, Strategy and Management

View Paper: https://www.semanticscholar.org/paper/bc914277ac9cd9d30b3b2a13eee946459a900f27

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Citations in the corpus

On the widely differing effects of free trade agreements: Lessons from twenty years of trade integration (2019, unknown): “For the estimates from Broda et al. (2008), only 9 countries in our data set overlap with theirs.”
Estimating the effects of non‐discriminatory trade policies within structural gravity models (2017, methodology): “…agricultural goods while controlling for the impact of bilateral non-tariff trade barriers may complement the popular approach from Broda et al. (2006, 2017) and Broda et al. (2008), which requires detailed unit price data and whose theoretical framework relies on a costlessly traded outside good.”
The Impact of the 2018 Tariffs on Prices and Welfare (2019, background): “This estimate is very much in line with standard estimates of trade elasticities, which lie within the range of 4 to 8, as, for example, in Broda and Weinstein (2006), Eaton and Kortum (2002), and Simonovska and Waugh (2014).8 In columns 4 and 5 of Table 1, we repeat this exercise using import…”
Trade and Investment under Policy Uncertainty: Theory and Firm Evidence (2015, unknown): “As we describe in our working paper, this is consistent with median estimates from Broda et al (2008) for Spain and the other EC-10 countries.”
Determinants of Global Value Chain Participation: Cross-Country Evidence (2020, unknown): “29 See Ansón et al. (2017) for estimates of the sensitivity of bilateral trade in parts and components and in final goods to logistics performance.”