On the Equivalence of Tariffs and Quotas under a Revenue Constraint

Chiou, Jiunn Rong; Hwang, Hong; Lin, Yan Shu

doi:10.1111/j.1467-9361.2005.00280.x

Cited by 3 publications

(2 citation statements)

References 13 publications

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“…More recently, Matschke (2003) demonstrates that tariffs and quotas can never be equivalent if asymmetric information between firms and governments is taken into account. Chiou et al (2005) show that when the marginal costs of the domestic firm are lower than those of the foreign firm, a quota normally leads to a higher welfare level than that under the equivalent tariff. Chen and Hwang (2006) compare the welfare between an optimal tariff and an optimal quota in a model in which the market is characterized by demand uncertainty and a trade policy comprising either a tariff or a quota which is selected before such uncertainty is revealed.…”

Section: Introductionmentioning

confidence: 99%

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Tariff and Quota Equivalence in Vertically Related Markets

Hwang

Kao

Peng

2011

Review Development Economics

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This paper re-examines the issue of tariff and quota equivalence by introducing an upstream market into the Hwang and Mai (1988) model, and then allowing the two downstream firms to cross-haul within each other's market. We assume the upstream monopolist can select either a two-part or a one-part tariff pricing strategy. It is found that if the upstream firm adopts a two-part (one-part) tariff pricing strategy, then the market price of the final good under a tariff will be higher (lower) than that under an equivalent quota; that is, the quota is set at the import level under the tariff regime. This result stands in stark contrast to the prior findings of both Hwang andMai (1988) andFung (1989). Moreover, if the quota rent is set as being equal to the tariff revenue, the social welfare under a tariff will necessarily be lower than that under an equivalent quota.

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Section: Introductionmentioning

confidence: 99%

“…It is a common practice in the literature on the tariff–quota equivalence to assume that they are the equal. See, for example, Fung (1989), Matschke (2003), and Chiou et al (2005).…”

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confidence: 99%

Tariff and Quota Equivalence in Vertically Related Markets

Hwang

Kao

Peng

2011

Review Development Economics

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Trade Policies and FDI with an Endogenous Market Structure

Hsu

Hwang

Lin

et al. 2023

The B.E. Journal of Economic Analysis &Amp; Policy

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Given an endogenous market structure, this research investigates the effects of tariff and equivalent quota policies on foreign firms’ FDI decisions. Findings show that foreign firms have symmetric (asymmetric) decisions in terms of FDI versus export under a tariff (quota) policy. Furthermore, FDI is more likely to occur under the tariff than the quota regime, but the former is definitely more (less) desirable than the latter in terms of domestic (world) welfare. Finally, a more cost-efficient firm is more likely to engage in FDI under either the tariff or the quota regime.

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On the Equivalence of Tariffs and Quotas with Incomplete Information

Ning

2020

SSRN Journal

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This paper compares the social welfare effects of tariffs and quotas as strategic trade policy instruments in an oligopolistic industry where the domestic market demand is uncertain and the policy is chosen before the uncertainty is resolved. The uncertain demand, once realized, is assumed to be available only to the domestic firm when the output game is played between domestic and foreign firms. To highlight our assertion, a simple scenario with linear demand, additive stochastic market shock, homogeneous products, and identical constant marginal costs is considered. It is shown that a tariff is superior to a quota regardless of the degree of uncertainty. Moreover, we also show that a prohibitive quota that results in autarky is always preferred to a quota at the free-trade level.

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On the Equivalence of Tariffs and Quotas under a Revenue Constraint

Cited by 3 publications

References 13 publications

Tariff and Quota Equivalence in Vertically Related Markets

Tariff and Quota Equivalence in Vertically Related Markets

Trade Policies and FDI with an Endogenous Market Structure

On the Equivalence of Tariffs and Quotas with Incomplete Information

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