Working Paper: NBER ID: w29115
Authors: Douglas A. Irwin; Anson Soderbery
Abstract: This paper examines the political economy of U.S. trade policy around the time of the Smoot-Hawley tariff of 1930, a period when policy was unconstrained by trade agreements. We consider a model of politically-optimal trade policy for a large country that can influence its terms of trade and where workers and firms lobby for protection. The predictions of the model hinge on import demand and export supply elasticities, which we estimate using detailed U.S. import data from 1927-35, as well as industry lobbying data. We find that tariff levels are largely determined by firm lobbies, but about about 5 percentage points of the tariffs are explained by terms of trade considerations. Decomposing the politically-optimal tariff in 1931 reveals an intensification of demand for protection by workers in the Smoot-Hawley tariff.
Keywords: No keywords provided
JEL Codes: F13; F14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political lobbying by workers (J58) | trade policy (F13) |
| political lobbying by firms (D72) | trade policy (F13) |
| implied optimal tariffs (F13) | actual applied tariffs (F14) |
| firm lobbies (L84) | tariff levels (F14) |
| terms of trade considerations (F14) | tariff levels (F14) |
| terms of trade effects + domestic political economy factors (F19) | politically-optimal tariff (F13) |