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Frontiers of Economics in China

Front Econ Chin    2012, Vol. 7 Issue (3) : 478-494     DOI: 10.3868/s060-001-012-0021-3
research-article |
Trade Restrictiveness and Deadweight Loss in China’s Imports
Bo Chen1(), Hong Ma2()
1. School of International Business Administration, Shanghai University of Finance and Economics, Shanghai 200433, China; 2. School of Economics and Management, Tsinghua University, Beijing 100084, China
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China is believed to have gained immensely from its admission into to the World Trade Organization (WTO) in 2001. One of the direct gains comes from the lessening of deadweight loss (DWL) due to tariff reduction. Conventional measures for DWL, however, are too aggregate to capture the trade policies, which are determined at a much higher disaggregated level, and ignore the interactions between tariff and corresponding import demand as suggested by theories. In this paper, we first systematically estimate the import demand elasticities at a highly disaggregated level and then match them with the most detailed lines of the applied tariff for the most favored nations as reported by the WTO. Using the detailed matching data, we construct Feenstra’s (1995) simplified trade restrictiveness index (TRI), which captures the covariance of tariff and the corresponding demand elasticity. Finally, we use the TRI to compute the DWL from1997 to 2008 and find that the DWL due to the tariff barrier was reduced to 0.73% of GNI in 2008, noticeably lower than the highest previous mark of 4.58% of GNI in 2001.

Keywords demand elasticities      non-processing imports      deadweight loss (DWL)     
Corresponding Authors: Bo Chen,; Hong Ma,   
Issue Date: 05 September 2012
 Cite this article:   
Bo Chen,Hong Ma. Trade Restrictiveness and Deadweight Loss in China’s Imports[J]. Front Econ Chin, 2012, 7(3): 478-494.
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