Abstract
We construct a new, global tariff dataset, and apply it to a multi-sector quantitative trade
model with heterogeneous firms, including nearly all countries of the world. The impact of the
Uruguay Round tariff reductions over 1990–2010 are analyzed, as well as the further cuts in
Preferential tariffs and the impact of moving to complete free trade. We find that the Uruguay
Round tariff cuts led to large welfare gains (2%–3% relative to 1990 for the world, higher in
Emerging and Developing countries), but that Preferential tariff cuts led to only small further
gains (0%–1%). Surprisingly, the hypothetical movement to free trade leads to the greatest
gains (5% relative to 1990, almost 10% in Emerging and Developing countries), which implies
that there is strong scope for gains from future multilateral tariff reductions, especially for
Emerging and Developing economies. These gains are large relative to prior estimates in the
literature and we attribute about nearly one-half of our measured gains to selection effects in
our heterogeneous-firm model, which are influenced by the scale of production and by two-tier
Armington aggregation.
Link to working paper and online appendix
Link to replication package
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