David Tarr

World Bank, Washington, Washington, D.C., United States

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Publications (88)17.94 Total impact

  • David G. Tarr
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    ABSTRACT: In 2010, Russia, Belarus and Kazakhstan formed the Eurasian Customs Union and imposed the Russian tariff as the common external tariff of the Customs Union. This resulted in almost doubling the external average tariff of the more liberal Kazakhstan. Russia has benefited from additional exports to Kazakhstan under the protection of the higher tariffs in Kazakhstan. But estimates reveal that the tariff changes resulted in substantial transfers from Kazakhstan to Russia as importers in Kazakhstan now purchase lower quality or higher priced Russian imports that are protected under the tariff umbrella of the common external tariff. Transfers from the Central Asian countries to Russia were the reason the Eurasian Economic Community (known as EurAsEC) failed, so this bodes badly for the ultimate success of the Eurasian Customs Union. What is different, however, is that the Eurasian Customs Union and its associated Common Economic Space aim to reduce non-tariff barriers and improve trade facilitation, and also to allow the free movement of capital and labor, liberalize services, and harmonize some regulations. Estimates by my colleagues and I show that if substantial progress could be made in trade facilitation and reducing non-tariff barriers, this could make the Customs Union positive for Kazakhstan and other potential Central Asian members. Unfortunately, so far the Customs Union has made these matters worse. But Russia’s accession to the World Trade Organization will eventually substantially reduce the transfers from Kazakhstan to Russia. Progress with non-tariff barriers and trade facilitation, however, will take a strong political commitment from Russia which we have not yet seen. But if that Russian political leadership is forthcoming, the Eurasian Customs Union could succeed where its predecessor failed.
    12/2012;
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    Oleksandr Shepotylo, David G. Tarr
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    ABSTRACT: After 18 years of negotiations, Russia has joined the World Trade Organization. This paper assesses how the tariff structure of the Russian Federation will change as a result of the phased implementation of its World Trade Organization commitments between 2012 and 2020 and how it has changed as a result of its agreement to participate in a Customs Union with Kazakhstan and Belarus. The analysis uses trade data at the ten digit level, which allows the first accurate assessment of the impact of these policy changes. It finds that World Trade Organization commitments will progressively and significantly lower the applied tariffs of the Russian Federation. After all commitments are implemented, tariffs will fall from 11.5 percent to 7.9 percent on an un-weighted average basis, or from 13.0 percent to 5.8 percent on a weighted average basis. The average "bound" tariff rate of Russia under its World Trade Organization commitments will be 8.6 percent, that is, 0.7 percentage points higher than the applied tariffs. Russia's commitments represent significant tariff liberalization, but compared with other countries that have acceded to the World Trade Organization, the commitments of the Russian Federation are not unusual, especially when compared with the Transition countries.
    08/2012;
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    David G. Tarr
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    ABSTRACT: With the growing importance of services and foreign direct investment in services, it is important to have a framework to analyze the impact of the liberalization of barriers to foreign direct investment in services. This paper summarizes several recent papers and builds policy-based computable general equilibrium models showing the dynamics of services, foreign direct investment and the endogenous productivity effect from services. The modeling framework shows that the liberalization of barriers against foreign direct investment in services yields welfare gains several times larger than the usual estimates from traditional computable general equilibrium models, which focus on goods trade, not foreign direct investment in services. The larger estimates are consistent with econometric evidence on the gains from services liberalization. The paper begins with a small stylized model to help understand the fundamental economics. Then it describes models developed at the request of the Russian government to assess the potential impact of Russia's accession to the WTO. Reviews of the work indicated that the modeling helped the Russian government gain public support for the WTO entry. The paper also describes a new technique that allows modelers to include tens of thousands of households in the model.
    03/2012;
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    Jesper Jensen, David G. Tarr
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    ABSTRACT: In this paper the authors develop an innovative 21 sector computable general equilibrium model of Armenia to assess the impact on Armenia of a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU, as well as further regional or multilateral trade policy commitments. They find that a DCFTA with the EU will likely result in substantial gains to Armenia, but they show that the gains derive from the deep aspects of the agreement. In order of importance, the sources of the gains are: (i) trade facilitation and reduction in border costs; (ii) services liberalization; and (iii) standards harmonization. A shallow agreement with the EU that focuses only on preferential tariff liberalization in goods will likely lead to small losses to Armenia primarily due to a loss of productivity from lost varieties of technologies from the Rest of the World region in manufactured products. Additional gains can be expected in the long run from an improvement in the investment climate. The authors estimate only small gains from a services agreement with the CIS countries, but significant gains from expanding services liberalization multilaterally. --
    Economics - The Open-Access, Open-Assessment E-Journal. 05/2011; 6(1):1-54.
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    Edward J. Balistreri, David G. Tarr
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    ABSTRACT: Given the growing importance of commitments to foreign investors in services in regional trade agreements, it is important to develop applied general equilibrium models to assess the impacts of liberalization of barriers to multinational service providers. This paper develops a 55 sector applied general equilibrium model of Kenya with foreign direct investment and Dixit-Stiglitz productivity effects from additional varieties of imperfectly competitive goods or services, and uses the model to assess its regional and multilateral trade options, focusing on commitments to foreign investors in services. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and results are reported as confidence intervals of the sample distributions. The analysis reveals that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Kenya with its African partners would be somewhat beneficial for Kenya. If a preferential agreement with African partners is combined with an agreement with the European Union, the gains would more than triple the gains of an Africa only agreement. Multilateral reduction of services barriers, however, would yield gains about 12 times the gains of an agreement with the Africa region alone. These results suggest that preferential liberalization in the region is a valuable first step, but wider liberalization, with larger partners and liberal rules of origin or multilaterally, will yield much larger gains due to providing access to a much wider set of services providers. The largest gains would come from domestic regulatory reform in services, as this would almost triple the gains of multilateral liberalization.
    01/2011;
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    Jesper Jensen, David G. Tarr
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    ABSTRACT: Despite the growing importance of commitments to foreign investors in services in regional trade agreements, there are no applied general equilibrium models in the literature that assess these regional impacts. This paper develops a 52 sector applied general equilibrium model of Tanzania with foreign direct investment, and uses that model to assess Tanzania's regional and multilateral trade options. The model incorporates the features of the modern theory of international trade that has shown empirically that trade and foreign direct investment can increase productivity, and trade and foreign direct investment with technologically advanced countries is especially valuable for that purpose. To assess the sensitivity of the results to parameter values, the model is executed 30,000 times, and the results are reported as confidence intervals of the sample distributions. The analysis finds that a 50 percent preferential reduction in the ad valorem equivalents of barriers in all business services by Tanzania with respect to its African regional partners would be slightly beneficial for Tanzania. But wider liberalization, with larger partners or multilaterally, it will yield much larger gains due to providing access to a much wider set of service providers. Finally, the results show that the largest gains in services would be derived from reduction of regulatory barriers that are geographically non-discriminatory.
    11/2010;
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    David G. Tarr
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    ABSTRACT: Many economists have argued that it is necessary to reorganize big banks that require sustained subsidies or are close to insolvency. By wiping out the shareholders and giving haircuts to bondholders, the resulting reorganized banks will be financially sound and capable of leading the country out of recession. But there are fears that failure of large financial institutions, especially a key player in the counterparty operations, will cause systemic financial market failure, and they are therefore “too big to fail.” However, when Washington Mutual failed, it was 6-7 times larger than the previous largest US bank to fail; it was placed into FDIC receivership and reopened literally the next day as J.P Morgan Chase, with account holders having full access to their deposits and bank services. When Lehman Brothers went bankrupt, it was the third largest user worldwide of credit default swaps for mortgage backed securities. But the Depository Trust and Clearing Corporation (DTCC) serves as a “central counterparty” guaranteeing all contracts traded under its auspices. The DTCC unwound all of Lehman’s credit default swap holdings within four weeks with all parties receiving payment on the terms of their original contracts, i.e. there was no systemic impact from losses on the Lehman credit default swaps. Moreover, while the DTCC indicates that it and its subsidiaries process about 95 percent of all swaps, in order to assure swaps are covered by clearing guarantees, the new financial reform law requires all eligible swaps must be submitted for clearing.
    08/2010;
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    David G. Tarr
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    ABSTRACT: Many economists have argued that it is necessary to reorganize big banks that require sustained subsidies or are close to insolvency. By wiping out the shareholders and giving haircuts to bondholders, the resulting reorganized banks will be financially sound and capable of leading the country out of recession. But there are fears that failure of large financial institutions will cause systemic financial market failure and they are therefore “too big to fail.” In this note, the author argues that the US experience, shows that “too big to fail” is a myth. When Washington Mutual failed, it was 6-7 times larger than the previous largest US bank to fail; it was placed into FDIC receivership and reopened literally the next day as J.P Morgan Chase, with account holders having full access to their deposits and bank services. More worrisome to many is the failure of a central player in the counterparty operations. But when Lehman Brothers went bankrupt, it was the third largest user worldwide of credit default swaps for mortgage backed securities. It had its massive credit default swap holdings unwound within four weeks by the Depository Trust and Clearing Corporation (DTCC) and its subsidiaries, with all parties receiving payment on the terms of their original contracts. Moreover, through the DTCC and new developing exchanges, there are financial market institutional mechanisms in place designed to assure that the smooth resolution of credit default swaps, as occurred in the Lehman case, will hold in general.
    07/2010;
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    Thomas F. Rutherford, David G. Tarr
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    ABSTRACT: In this paper, the authors develop a 10-region comparative static computable general-equilibrium model of Russia to assess the impact of accession to the World Trade Organization on the regions of Russia. The model allows for foreign direct investment in business services and endogenous productivity effects from additional varieties of business services and goods produced under imperfect competition. The authors then show that these features are crucial to the results, as the welfare gains are about 20 times greater than in a constant-returns-to-scale model. The results for the estimated gains vary considerably across the regions; this is principally explained by the ability of the different regions to benefit from a reduction in barriers against foreign direct investment. Copyright © 2010 Blackwell Publishing Ltd.
    Review of International Economics 01/2010; 18(1):30-46. · 0.63 Impact Factor
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    David G. Tarr
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    ABSTRACT: The paper explains that the Russian gas giant, Gazprom, has failed to invest adequately, resulting in very little development of new gas supplies in Russia. The result has been progressively increasing use by Gazprom of central Asian gas supplies, at progressively higher prices for Russia. The increased prices of gas for Russian consumers have shown that it is crucial for Russian welfare to allow new entrants, and to introduce competition in the Russian domestic market. Competition among multiple gas suppliers from Russia, however, would erode or eliminate the monopoly profits of the Russian Federation on gas exports. Thus, with a more competitive domestic market, the Russian government would be expected to grant exclusive exporting rights to a single entity (as it presently does with Gazprom) or impose export taxes. Thus, Europe should not expect to achieve cheaper Russian gas as a result of structural reforms within the Russian gas market. More promising avenues for European energy diversification are new pipeline construction to open up new sources of supply independent of Russia (especially the Nabucco pipeline) and liquefied natural gas purchases. *
    CEPE Center for Energy Policy and Economics, ETH Z�rich, CEPE Working paper series. 01/2010;
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    David Tarr, Natalya Volchkova
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    ABSTRACT: This paper summarizes the estimates of what Russia will get from World Trade Organization accession and why. A key finding is the estimate that Russia will gain about $53 billion per year in the medium term from World Trade Organization accession and $177 billion per year in the long term, due largely to its own commitments to reform its own business services sectors. The paper summarizes the principal reform commitments that Russia has undertaken as part of its World Trade Organization accession negotiations, and compares them with those of other countries that have acceded to the World Trade Organization. It finds that the Russian commitments represent a liberal offer to the members of the World Trade Organization for admission, but they are typical of other transition countries that have acceded to the World Trade Organization. The authors discuss the outstanding issues in the Russian World Trade Organizaiton accession negotiations, and explain why Russian accession will result in the elimination of the Jackson-Vanik Amendment against Russia. They discuss Russian policies to attract foreign direct investment, including an assessment of the impact of the 2008 law on strategic sectors and the increased role of the state in the economy. Finally, the authors assess the importance of Russian accession to Russia and to the international trading community, and suggestions for most efficiently meeting the government’s diversification objective.
    The World Bank, Policy Research Working Paper Series. 01/2010;
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    David G. Tarr
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    ABSTRACT: Purpose – The purpose of this paper is to discuss the key regulatory, market, and political failures that led to the 2008-2009 US financial crisis and to suggest appropriate recommendations for reform. Design/methodology/approach – The approach is to examine the underlying incentives that led to the crisis and to provide supporting data to support the hypotheses. Findings – While Congress was fixing the savings and loan crisis, it failed to give the regulator of Fannie Mae and Freddie Mac normal bank supervisory power. This was a political failure as Congress was using government sponsored enterprise (GSE) resources and the resources of narrow constituencies for their own advantage at the expense of the public interest. Second, in the mid-1990s, to encourage home ownership, the Administration changed enforcement of the Community Reinvestment Act, effectively requiring banks to use flexible and innovative methods to lower bank mortgage standards to underserved areas. Crucially, this disarmed regulators and the risky mortgage standards then spread to other sectors of the market. Market failure problems ensued as banks, mortgage brokers, securitizers, credit rating agencies, and asset managers were all plagued by problems such as moral hazard or conflicts of interest. Originality/value – The paper focuses on the political economy reasons for why Congress and US administrations provided these perverse incentives to the GSEs and banks to lower mortgage standards. It also proposes some innovative methods of improving bank regulation that address the regulatory capture problem.
    Journal of Financial Economic Policy 01/2010; 2(June):163-186.
  • David G. Tarr
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    ABSTRACT: There is a growing consensus that the U.S. government programs of bailing out the large financial institutions is deeply flawed, and that there are much better ones available. The programs of the U.S. for the purchase of toxic assets potentially transfer trillions of dollars from the US taxpayer to the financial institutions and risk the credit of the U.S. government. Estimates suggest that the troubled asset purchases are inadequate to put the financial institutions on a sound footing. So zombie banks persist, and their avoidance of normal business lending constitutes a roadblock to economic recovery. The right approach is to take the banks that require substantial subsidies into FDIC receivership, wiping out shareholders and giving the bondholders a haircut. Chapter 11 bankruptcy proceedings are another viable option in many cases. The restructured institutions will be re-privatized as financially viable institutions. The smooth resolution of the Lehman Brothers bankruptcy, that financial market regulators assessed occurred with "no major operational disruptions or liquidity problems," shows that the allegation of systemic financial market failure from bankruptcy of a large central player in the counterparty transactions is grossly exaggerated. Crucially, bailing out these institutions provides perverse incentives to financial firms that they can take risks at taxpayer expense, sowing the seeds for the next crisis.
    05/2009;
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    David G. Tarr
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    ABSTRACT: This paper discusses the political economy behind the principal trade policy decisions in Russia since independence. I discuss why export restraints were widely employed in the early transition years and why the export quotas proved more difficult to remove than anticipated. Why it was so difficult to resolve the monetary basis for the collapse in trade among the newly independent states. Why the search for rents for Russian industry motivated the creation of a customs union among selected countries in the Commonwealth of Independent States, but also proved its undoing. How Russian leaders initially were exceptionally insightful in seeing WTO accession as a golden opportunity for domestic reform, but why in recent years they have turned to industrial policy for diversification. I discuss the possibly unique political economy of Russia in which political contributions are extracted without political influence.
    04/2009;
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    Thomas Rutherford, David Tarr
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    ABSTRACT: This paper develops a seven-region comparative static computable general equilibrium model of Russia to assess the impact of accession tothe World Trade Organization on these seven regions (the federal okrugs) of Russia. In order to assess poverty and distributional impacts, the model includes ten households in each of the seven federal okrugs, where household data are taken from the Household Budget Survey of Rosstat. The model allows for foreign direct investment in business services and endogenous productivity effects from additional varieties of business services and goods, which the analysis shows are crucial to the results. National welfare gains are about 4.5 percent of gross domestic product in the model, but in a constant returns to scale model they are only 0.1 percent. All deciles of the population in all seven federal okrugs can be expected to significantly gain from Russian World Trade Organization accession, but due to the capacity of their regions to attract foreign direct investment, households in the Northwest region gain the most, followed by households in the Far East and Volga regions. Households in Siberia and the Urals gain the least. Distribution impacts within regions are rather flat for the first nine deciles; but the richest decile of the population in the three regions that attract a lot of foreign investment gains significantly more than the other nine representative households in those regions.
    04/2008;
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    ABSTRACT: This paper employs a 55 sector small open economy computable general equilibrium model of the Kenyan economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Kenya. The model incorporates foreign direct investment in business services and productivity effects in imperfectly competitive goods and services markets endogenously, through a Dixit–Stiglitz framework. The ad valorem equivalent of barriers to foreign direct investment have been estimated based on detailed questionnaires completed by specialists in Kenya. We estimate very substantial gains to Kenya from regulatory liberalization in business services, and additional gains from uniform tariffs. The estimated gains increase to 50% of consumption in the long run steady state model, where the impact on the accumulation of capital from an improvement in the productivity of capital is taken into account. Decomposition exercises reveal that the largest gains to Kenya will derive from liberalization of costly regulatory barriers that are non-discriminatory in their impacts between Kenyan and multinational service providers.
    Economic Modelling. 03/2008;
  • Oleksandr Shepotylo, David Tarr
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    ABSTRACT: The Russian tariff structure contains over 11,000 tariff lines. Of these, a specific tariff may apply for about 1,700. Due to a new data set, this is the first paper to accurately assess tariff rates. We find that the average tariff in Russia has increased between 2001 and 2003, from about 11.5 percent to between 13 percent and 14.5 percent, but held steady in 2004 and 2005. This places Russia's tariffs at a level slightly higher than other middleincome countries and considerably higher than Organization for Economic Cooperation and Development countries. Russia implemented tariff simplification in 2000-2001. Contrary to conventional wisdom on the effect of tariff simplification, the trade-weighted standard deviation of the Russian tariff increased, approximately doubling from 9.5 percent in 2001 to 18 percent in 2003, but it then fell to 15.2 percent by 2005. We show that ignoring the specific tariffs results in an underestimate of average tariff rates by about one to three percentage points and an even larger underestimate of the standard deviation.
    Eastern European Economics 02/2008; 46(5):47-56. · 0.33 Impact Factor
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    Thomas F. Rutherford, David G. Tarr
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    ABSTRACT: We employ a computable general equilibrium model of the Russian economy to assess the impact of accession to the World Trade Organization (WTO) on income distribution and the poor. We incorporate all 55,098 households from the Russian Household Budget Survey as agents in the model. The model includes FDI in services and Dixit–Stiglitz endogenous productivity effects in imperfectly competitive goods and services sectors, features which are crucial to the results. We show that incorporating the diversity of households though a real household model is important for assessing household impacts, but getting the key model features right is equally important.
    Journal of International Economics. 02/2008;
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    David Tarr
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    ABSTRACT: This paper summarizes the principal reform commitments that Russia has undertaken as part of its World Trade Organization (WTO) accession negotiations, providing detailed assessments in banking, insurance, and agriculture. The paper assesses the gains to the Russian economy from these commitments, based on a summary of several modeling efforts undertaken by the author and his colleagues. The author compares Russian commitments with those of other countries that have recently acceded to the WTO to assess the claim that the demands on Russia are excessive due to political considerations. He explains why Russian WTO accession will result in the elimination of the Jackson-Vanik Amendment against Russia. Finally, he discussesthe remaining issues in the negotiations and the time frame for Russian accession as of the fall of 2007.
    01/2008;
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    ABSTRACT: This paper employs a 52-sector, small, open-economy computable general equilibrium model of the Tanzanian economy to assess the impact of the liberalization of regulatory barriers against foreign and domestic business service providers in Tanzania. The model incorporates productivity effects in both goods and services markets endogenously, through a Dixit-Stiglitz framework. It summarizes policy notes on the key business service sectors that were prepared for this work, and estimates the ad valorem equivalent of barriers to foreign direct investment based on these policy notes and detailed questionnaires completed by specialists in Tanzania. The authors estimate that Tanzania will gain about 5.3 percent of the value of Tanzanian consumption in the medium run (or about 4.8 percent of gross domestic product) from a full reform package that also includes uniform tariffs. The estimated gains increase to about 16 percent of consumption in the long-run, steady-state model, where the impact on the accumulation of capital from an improvement in the productivity of capital is taken into account. Decomposition exercises reveal that the largest gains to Tanzania will derive from liberalization of costly regulatory barriers that are non-discriminatory in their impacts between Tanzanian and multinational service providers.
    The World Bank, Policy Research Working Paper Series. 01/2008;

Publication Stats

1k Citations
17.94 Total Impact Points

Institutions

  • 1989–2010
    • World Bank
      Washington, Washington, D.C., United States
  • 2008
    • ETH Zurich
      Zürich, Zurich, Switzerland
    • Colorado School of Mines
      • Division of Economics and Business
      Golden, CO, United States
  • 2002–2003
    • University of Colorado
      Denver, Colorado, United States
  • 1994–1996
    • University of Geneva
      • Department of Economics
      Genève, GE, Switzerland