Working Paper: NBER ID: w31662
Authors: Renee Bowen; J. Lawrence Broz; B. Peter Rosendorff
Abstract: Trade policy is set by domestic political bargaining between globalists and protectionists, representing owners of factors specific to export and import-competing sectors respectively. Consistent with the post-Civil War Era of Restriction, protectionists implement high tariffs when status quo tariffs are low. When status quo tariffs are high, reciprocal free trade combined with domestic transfers to protectionists are implemented, explaining the 1930s Era of Reciprocity with Re- distribution. Consensus emerges for Retreat from free trade when imports are high and domestic transfers are low, suggesting that US protectionist turn in the late 2010s was in part due to low levels of social transfers.
Keywords: Trade Policy; Political Economy; Tariffs; Domestic Transfers
JEL Codes: B27; F13; P00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| status quo tariffs low (F14) | protectionists implement high tariffs (F52) |
| status quo tariffs high (F13) | protectionists favor reciprocal free trade with domestic transfers (F13) |
| high imports and low domestic transfers (F16) | consensus for retreat from free trade (F13) |
| insufficient domestic transfers and expansion of foreign trade sector (F49) | inability to maintain free trade (F13) |
| inability to forge a political coalition (D72) | retreat from free trade (F13) |