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| Author: | Magee, S. P. Lee, H.-L. |
| Title: | Endogenous tariff creation and tariff diversion in a customs union |
| Journal: | European Economic Review
2001 : MAR, VOL. 45:3, p. 495-518 |
| Index terms: | CUSTOMS UNIONS POLITICAL ECONOMY TARIFFS FREE RIDERS INDUSTRIAL STRUCTURE |
| Language: | eng |
| Abstract: | The common external tariffs of the EEC declined after it was formed. The authors label as 'tariff diversion' the four forces pushing down external tariffs after EEC formation. The authors label as 'tariff creation' the three forces pushing up external tariffs after EEC formation. There was virtually no evidence that EEC tariffs increased because of terms of trade effects. The authors quantify these forces using Magee et al.'s endogenous tariff model and Lee's model of free riding and find that even after adjustment for GATT tariff declines, the common external industry tariffs of the EEC declined in the first 15 years after formation because the tariff diversion effects exceeded the tariff creation effects. |
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