Endogenous Tariff Protection and the Level of Trade Distortions in Russia

This paper addresses the political economy background of import protection policy in Russia under the system of policy-making institutions developed during the period 1992–1997. Models explaining import penetration levels and import tariff rates are constructed and estimated independently as well as in a simultaneous setting. Import penetration measures, instrumented by factor intensity variables and an economies-of-scale variable, appear to exercise a highly significant posi-tive impact on the level of tariff rates. At the same time, no statistically significant negative influence of tariff rates on the level of import penetration was found, meaning that producers' losses due to the trade liberalization can be less than usually expected.