Consumers’ Welfare and Trade Liberalization: Evidence from the Car Industry in Colombia

SummaryThis paper examines the effects of tariff removal on consumers’ welfare focusing on the Colombian trade liberalization process and its automobile industry. Using product level data this paper calculates the post-reform gains in consumers’ welfare to be just below three thousand dollars per purchaser. Counterfactual simulations suggest that the gains achieved are due, for the most part, to increased variety rather than to price competition.