Are All Trade Protection Policies Created Equal? Empirical Evidence for Nonequivalent Market Power Effects of Tariffs and Quotas
September 2010
Working Paper Number:
CES-10-27
Abstract
The steel industry has been protected by a wide variety of trade policies, both tariff- and quota-based, over the past decades. This extensive heterogeneity in trade protection provides the opportunity to examine the well-established theoretical literature predicting nonequivalent effects of tariffs and quotas on domestic firms' market power. Robust to a variety of empirical specifications with U.S. Census data on the population of U.S. steel plants from 1967-2002, we find evidence for significant market power effects for binding quota-based protection, but not for tariff-based protection. There is only weak evidence that antidumping protection increases market power.
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