Recent developments in the measurement of the effects of trade policy: index number method and trade restrictiveness index

In the policy arena, there is a demand for “trade distortion indicatorsâ€, but many of the traditional indices are difficult to compute and interpret. Recent developments in the literature have led to new indicators: the Trade Restrictiveness Index (TRI) - measuring the tariff equivalent in terms of welfare -, and the Index Number Method (INM) - measuring the tariff equivalent of the deadweight loss from quality upgrading. This paper shows that the INM can be extended in order to compute a measure of trade distortion equivalent to the TRI.