Endogenous tariff creation and tariff diversion in a customs union

Article Abstract:

The common external tariffs of the EEC declined after it was formed. We label as `tariff diversion' the four forces pushing down external tariffs after EEC formation (endowment effects of capital deepening, reduced EEC versus country industry concentration, general industry prosperity and greater export specialization). We label as `tariff creation' the three forces pushing up external tariffs after EEC formation (terms of trade effects, increased industry concentration and industries hurt by rapid growth in intra-EEC imports). There was virtually no evidence that EEC tariffs increased because of terms of trade effects. We quantify these forces using Magee et al.'s (1989) endogenous tariff model and Lee's (1996) 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 (from 1968-1983) because the tariff diversion effects exceeded the tariff creation effects. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: F13; F15; H42; L11 Keywords: Protection; Customs unions; Endogenous protection; Political economy; Tariffs; Free riding; Lobbying; Industry structure; Endogenous free riding

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Election goals and income redistribution: Recent evidence from Albania

Article Abstract:

This paper examines the impact of political competition on block grants from federal to sub-federal levels of government. We model the extent and direction of income redistribution as determined proximately by the political agendas of central decision makers and, at a deeper level, by the institutions within which they find themselves operating. We contrast two political objective functions that yield different empirical predictions of the ways in which politics should affect fiscal policy. Lessons learned here may prove important in understanding limits on the types of redistribution possible via block grants, given the institutional framework, in both developing and developed countries. [C] 2001 Elsevier Science B.V. All rights reserved. JEL classification: H1; H7; O1 Keywords: Political objectives; Block grants; Albania

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