Working Paper: NBER ID: w28142
Authors: Douglas A. Irwin; Maksym G. Chepeliev
Abstract: This paper provides a quantitative general equilibrium evaluation of the repeal of Britain’s Corn Laws in 1846, the signature trade policy event of the nineteenth century. In studying the impact of abolishing the import duty on wheat, our framework highlights (a) the large open economy impact on the country’s terms of trade and (b) the distribution impact on the factor earnings and the expenditure patterns of two different income groups. Based on a detailed input-output matrix of the British economy in 1841, our model suggests that the repeal left Britain’s overall welfare roughly unchanged as the static efficiency gains are offset by the adverse terms-of-trade effects. Laborers and capital owners gained a slight amount at the expense of landowners (whose income fell about 3-5 percent). Combining these changes in factor payments with the different consumption patterns across income groups, we find that the top 10 percent of income earners lose while the bottom 90 percent of income earners, who spent a disproportionate amount of their income on food, gain.
Keywords: Corn Laws; Trade Policy; Welfare; Income Distribution
JEL Codes: F13; F17; N33; N73
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Repeal of the corn laws (N93) | Overall welfare of Britain (I31) |
| Repeal of the corn laws (N93) | Income of laborers (J31) |
| Repeal of the corn laws (N93) | Income of capital owners (D33) |
| Repeal of the corn laws (N93) | Income of landowners (Q15) |
| Repeal of the corn laws (N93) | Welfare of top 10% income earners (I31) |
| Repeal of the corn laws (N93) | Welfare of bottom 90% income earners (I31) |