The Welfare Consequences of Import Tariffs: A Quantitative Perspective
- Publication Type
- Journal contribution (peer reviewed)
- Authors
- Jung, Benjamin (mit Gabriel Felbermayr und Mario Larch)
- Year of publication
- 2015
- Published in
- Journal of International Economics
- DOI
- 10.1016/j.jinteco.2015.05.002
The quantitative trade literature often does not distinguish between tariffs and iceberg trade costs. This paper explores qualitatively and quantitatively how this distinction matters for the gains from trade. Most obviously, tariffs generate government revenues, while icebergs do not. In models of monopolistic competition, they may also affect entry. Finally, depending on whether they are modeled as cost or demand shifters, tariffs may have different implications on profits, entry, and, in turn, on the elasticity of trade flows and welfare. We show that the welfare formula by Arkolakis, Costinot, and Rodriguez-Clare (2012) requires qualification, even in the simple single-sector case. We find that the quantitative welfare consequences of cost- versus demand-shifting tariffs can be important.