Working Paper: NBER ID: w31798
Authors: Rodrigo Ado; Arnaud Costinot; Dave Donaldson; John A. Sturm
Abstract: A prominent explanation for why trade is not free is politicians’ desire to protect some of their constituents at the expense of others. In this paper we develop a methodology that can be used to reveal the welfare weights that a nation’s import tariffs implicitly place on different groups of society. Applied in the context of the United States in 2017, this method implies that redistributive trade protection accounts for a significant fraction of US tariff variation and causes large monetary transfers between US individuals, mostly driven by differences in welfare weights across sectors of employment. Perhaps surprisingly, differences in welfare weights across US states play a much smaller role.
Keywords: trade protection; redistributive politics; welfare weights; tariffs
JEL Codes: D60; D70; F00
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| redistributive motives (D63) | tariff variations (F14) |
| sector-specific welfare weights (D69) | tariff variations (F14) |
| state-specific welfare weights (I38) | tariff variations (F14) |
| higher welfare weights (D69) | social marginal utility of income (D11) |
| equalized welfare weights (D63) | annual shift of income (D31) |
| political process governing trade policy (F13) | economic outcomes (F61) |