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Title

The protectionist bias of duty drawbacks: evidence from Mercosur

Authors
Cadot, Olivier
Published in Journal of International Economics. 2003, vol. 59, no. 1, p. 161-182
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 who use imported intermediates in their production. 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. In its absence the common external tariff would have been on average 3.5 percentage points (25 percent) higher.
Keywords Duty-drawbacksPolitical-economy MercosurNew regionalism
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DE MELO, Jaime, CADOT, Olivier, OLARREAGA, Marcelo. The protectionist bias of duty drawbacks: evidence from Mercosur. In: Journal of International Economics, 2003, vol. 59, n° 1, p. 161-182. https://archive-ouverte.unige.ch/unige:55449

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Deposited on : 2015-04-12

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