Import-Reducing Effect of Trade Barriers: A Cross-Country Investigation

Provided by: International Monetary Fund
Format: PDF
A comprehension empirical investigation is carried out to ascertain the import-reducing effect of trade protection barriers. This paper first presents a statistical summary of the status of global trade protection. Then, based on a monopolistic competition trade model and 1994 cross-country data on trade on trade barriers, trade flows and production, it estimates the import- reducing effect of trade barriers including countries from the most developed one like those in the Group of Seven to the least developed one, Bangladesh. It specifies an empirical model that captures the stylized fact well and helps generate sensible estimates. The econometric framework is designed to control for the simultaneous determination of trade flows, trade barriers, and production. It is found that both tariff and NTBs are quite significant in restricting imports.

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