Working Paper: NBER ID: w12162
Authors: Douglas A. Irwin
Abstract: In the late nineteenth century, the United States imposed high tariffs to protect domestic manufacturers from foreign competition. This paper examines the magnitude of protection given to import-competing producers and the costs imposed on export-oriented producers by focusing on changes in the domestic prices of traded goods relative to non-traded goods. Because the tariffs tended to increase the prices of non-traded goods, the degree of protection was much less than indicated by nominal rates of protection; the results here suggest that the 30 percent average tariff on imports yielded a 15 percent implicit subsidy to import-competing producers while effectively taxing exporters at a rate of 11 percent. The paper also finds that tariff policy redistributed large amounts of income (about 9 percent of GDP) across groups, although the impact on consumers was only slightly negative because they devoted a sizeable share of their expenditures to exportable goods. These findings may explain why import-competing producers pressed for even greater protection in the face of already high tariffs and why consumers (as voters) did not strongly oppose the policy.
Keywords: No keywords provided
JEL Codes: F1; N7
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Imposition of tariffs (F13) | Increase in domestic price of importables (F14) |
| Imposition of tariffs (F13) | Increase in price of nontraded goods (H49) |
| Increase in domestic price of importables (F14) | Implicit subsidy to domestic import-competing producers (F14) |
| Increase in price of nontraded goods (H49) | Mitigation of the effect of tariffs on prices of importables (F14) |
| Imposition of tariffs (F13) | Tax on exporters (H25) |
| Redistribution of income (D31) | Impact on consumers, exporters, and import-competing producers (F61) |
| Consumers' expenditures on exportable goods (E20) | Lack of strong opposition to tariff policies (F13) |