Question

What is the short-term impact of a reduction in tariffs?

Impact of Tariff Reduction (Trade liberalization effect)

Estimates the effect of a change in import price, such as change in prices when tariffs are reduced, on the domestic price of a commodity.

Data Requirements

  • Domestic and import prices over time are needed to estimate the elasticity of price transmission.

Variables
Δ Pd / Pd proportional change in the domestic price
Δ Pi / Pi proportional change in the import price
ε( Pd , Pi ) elasticity of price transmission (can be estimated by calculating the ratio between percentage changes in domestic food prices and import prices over time)

Output

Change in domestic price due to the change in import price.

Data status: The FAO-GIEWS data will allow users to calculate this for some countries, for some commodities on a monthly basis.

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