Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 2004 erstellt
Description:
Over half of international trade occurs in intermediate inputs. This paper shows a reversal in policy recommendations for opening up the economy when imported intermediates are included in the model explicitly instead of assuming that all imports are final goods. In a "simple" model, where imports are treated as final goods high trade taxes shift the consumption away from imported goods towards domestically produced goods. In the "advanced" model, where imports can be both, final goods and intermediates, trade taxes impose distortion not only on the consumption side but also on the production side. High trade taxes distort the production by causing a shift away from imported intermediates toward domestic intermediates. Therefore, it is intuitive that in the "advanced model" trade taxes generate more distortion. This paper tests this intuition by employing two sets of CGE models for six different countries. The switch from the "simple" to the "advanced" model generates a reversal in policy recommendations regarding trade liberalization. Implications of this paper are of special interest for modelers and institutions which provide policy recommendations