Quantitative Models of Commercial Policy
What tariffs would countries impose if they did not have to fear any retaliation? What would occur if there was a complete breakdown of trade policy cooperation? What would be the outcome if countries engaged in fully efficient trade negotiations? And what would happen to trade policy cooperation if the world trading system had a different institutional design? While such questions feature prominently in the theoretical trade policy literature, they have proven difficult to address empirically, because they refer to what-if scenarios for which direct empirical counterparts are hard to find. In this chapter, I introduce research which suggests overcoming this difficulty by applying quantitative models of commercial policy.
This is a draft of a chapter forthcoming in the Handbook of Commercial Policy. I would like to thank the editors Kyle Bagwell and Bob Staiger, my discussants Lorenzo Caliendo and Penny Goldberg, as well as my student reviewers Ohyun Kwon and Wisarut Suwanprasert for very helpful comments and discussions. I am indebted to Yuxing Peng for streamlining the code which is available from my website and to Yuan Mei for proofreading the draft. All remaining errors are mine. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.