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| Author: | Cadot, O. Melo, J. de Olarreaga, M. |
| Title: | The Protectionist Bias of Duty Drawbacks: Evidence from Mercosur |
| Journal: | Journal of International Economics
2003 : JAN, VOL. 59:1, p. 161-182 |
| Index terms: | INTERNATIONAL ECONOMICS INTERNATIONAL TRADE TRADE POLICY TRADE BARRIERS |
| Language: | eng |
| Abstract: | In a political-economy setting where tariffs and duty drawbacks are endogenously chosen through industry lobbying, it is shown that full duty-drawbacks are granted to exporters. This in turn decreases their incentives to counter-lobby against high tariffs on their inputs. In equilibrium, higher tariffs will be observed on these goods. The creation of a regional block will change the political equilibrium. Duty-drawbacks will be eliminated on intra-regional exports, which in turn will lead to lower tariffs for goods used as inputs by intra-regional exporters. Evidence from Mercosur suggests that the elimination of duty-drawbacks for intra-regional exports led to increased counter-lobbying by users of intermediate products. |
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