Please use this identifier to cite or link to this item: https://www.um.edu.mt/library/oar/handle/123456789/98718
Title: Tariff overhang and aid : theory and empirics
Authors: Lorz, Oliver
Thede, Susanna
Keywords: Economic assistance
Foreign trade regulation
International trade
Issue Date: 2020
Publisher: FREIT
Citation: Lorz, O., & Thede, S. (2020). Tariff overhang and aid : theory and empirics. FREIT Working Paper 1743.
Abstract: In this paper, we consider aid payments as a possible explanation for tariff overhangs. We set up a theoretical model in which rich countries use development aid to pay for tariff concessions. Developing countries, in turn, may anticipate such a policy in the negotiations for tariff bindings. Setting the bound tariff rate at a relatively high level can serve as a mechanism to incentivize rich countries to carry on with aid payments in the subsequent “aid for trade” game. We empirically examine this hypothesis using detailed data on WTO members’ bound and applied tariff rates under the Uruguay agreement. The data sample contains almost all aid recipients participating in the Uruguay round negotiations. Our results provide strong support for the model’s prediction that larger tariff overhangs are implemented by countries that receive more aid.
URI: https://www.um.edu.mt/library/oar/handle/123456789/98718
Appears in Collections:Scholarly Works - InsEUS

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