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On the proper computation of Ad Valorem equivalent of non-tariff measures

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  • Duc Bao Nguyen
  • Antoine Bouët
  • Fousseini Traoré
Abstract
In all the previous studies evaluating the Ad Valorem Equivalent (AVE) of Non-Tariff Measures (NTMs) based on a gravity equation, Jensen’s inequality is not considered. Yet the issue of estimating the impact of dummy or count variables in semi-log or related equations has been raised since the early eighties. In this article, we illustrate the bias associated with the omission of Jensen’s inequality and show that when it is not considered, the estimation of AVEs can be significantly biased. This omission leads to a significant underestimation of the restrictive impact of NTMs and can even change the sign of the AVE.

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  • Duc Bao Nguyen & Antoine Bouët & Fousseini Traoré, 2022. "On the proper computation of Ad Valorem equivalent of non-tariff measures," Applied Economics Letters, Taylor & Francis Journals, vol. 29(4), pages 298-302, February.
    • Handle: RePEc:taf:apeclt:v:29:y:2022:i:4:p:298-302
    DOI: 10.1080/13504851.2020.1864273
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    Cited by:

    1. Bouët, Antoine & Elbehri, Aziz & Nguyen, Duc Bao & Traoré, Fousseini, 2022. "Measuring Agricultural Trade Integration in Southeast Asia," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 37(2), pages 235-266.
    2. Bouët, Antoine & Nimenya, Nicodème, 2023. "Agricultural trade and trade integration in the East African community," IFPRI book chapters, in: Africa agriculture trade monitor 2023, chapter 6, pages 175-204, International Food Policy Research Institute (IFPRI).
    3. Jayson Beckman & Michael E. Johnson & Maros Ivanic, 2024. "Agriculture and AfCFTA: NTM reductions increase intra‐Africa trade," Agricultural Economics, International Association of Agricultural Economists, vol. 55(2), pages 200-222, March.

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