Working Paper: CEPR ID: DP14775
Authors: Vellore Arthi; Markus Lampe; Ashwin Nair; Kevin O'Rourke
Abstract: What is the role of trade policy in promoting intra-Empire trade? We address the question in the context of interwar India, whose trade policies have been accused of harming British export interests. We quantify the impact of trade policy on the value and composition of Indian imports, using novel disaggregated data on both trade policies and imports for 114 commodity categories coming from 42 countries. We find that even though Indian protection lowered total imports, it substantially boosted imports from the UK. Despite the rising tariff barriers facing British ex- porters, trade diversion from other countries ensured that Indian trade policy benefited them overall.
Keywords: trade policy; trade elasticities; india; interwar period
JEL Codes: F13; F14; N75
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Indian protectionism (F52) | total imports (F10) |
| Indian protectionism (F52) | imports from the UK (F19) |
| higher tariffs on non-British imports (F49) | substitution effect favoring British goods (F16) |
| rising tariff barriers faced by British exporters (F14) | trade diversion from other countries (F69) |
| increase in British exports (F10) | aggregate UK exports (F10) |
| increase in British exports (F10) | UK cotton cloth exports (L67) |