Are All Trade Protection Policies Created Equal? Empirical Evidence for Nonequivalent Market Power Effects of Tariffs and Quotas

Bruce Blonigen, Benjamin H. Liebman, Justin R. Pierce, Wesley W. Wilson

NBER Working Paper No. 16391
Issued in September 2010
NBER Program(s):   ITI

Over the past decades, the steel industry has been protected by a wide variety of trade policies, both tariff- and quota-based. We exploit this extensive heterogeneity in trade protection to examine the well-established theoretical literature predicting nonequivalent effects of tariffs and quotas on domestic firms’ market power. Robust to a variety of empirical specifications with U.S. Census data on the population of U.S. steel plants from 1967-2002, we find evidence for significant market power effects for binding quota-based protection, but not for tariff-based protection. There is only weak evidence that antidumping protection increases market power.

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Acknowledgments

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