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Why did the Tariff--Growth Correlation Change after 1950?

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Author Info

  • Michael A. Clemens
  • Jeffrey G. Williamson

Abstract

This article uses a new database to establish a key finding: high tariffs were associated with fast growth before World War II, while they have been associated with slow growth thereafter. The paper offers explanations for the sign switch by controlling for novel measures of the changing world economic environment. Rejecting alternative explanations based on changing export market growth or transportation cost declines, it shows how the modern negative correlation could be reversed in a world environment characterized by a moderately higher generalized tariff protection such as that which prevailed before 1914. We show that an increase in average tariff rates among trading partners by just one third might suffice to reverse any negative relationship between an average country's tariffs and its growth. An increase in own tariffs after 1950 hurt or at least didn't help growth, but it might have helped growth in a world where average trading partners' tariffs were moderately higher and retaliation was the best strategy. The world environment matters. Leader-country reaction to big world events matters.

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Bibliographic Info

Article provided by Springer in its journal Journal of Economic Growth.

Volume (Year): 9 (2004)
Issue (Month): 1 (03)
Pages: 5-46

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Handle: RePEc:kap:jecgro:v:9:y:2004:i:1:p:5-46

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Web page: http://www.springerlink.com/link.asp?id=102931

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Cited by:
  1. Sambit Bhattacharyya & Roland Hodler, 2010. "Do Natural Resource Revenues Hinder Financial Development? The role of political Institutions," OxCarre Working Papers 053, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  2. Hauner, David & Prati, Alessandro & Bircan, Cagatay, 2013. "The interest group theory of financial development: Evidence from regulation," Journal of Banking & Finance, Elsevier, vol. 37(3), pages 895-906.
  3. Francisco J. Buera & Alexander Monge-Naranjo & Giorgio E. Primiceri, 2008. "Learning the Wealth of Nations," NBER Working Papers 14595, National Bureau of Economic Research, Inc.
  4. Sindzingre, Alice, 2005. "Explaining Threshold Effects of Globalization on Poverty: An Institutional Perspective," Working Paper Series RP2005/53, World Institute for Development Economic Research (UNU-WIDER).
  5. Kevin H. O’Rourke, 2009. "Power and Plenty in 2030," The Institute for International Integration Studies Discussion Paper Series iiisdp298, IIIS.
  6. Birdsall, Nancy, 2006. "Stormy Days on an Open Field: Asymmetries in the Global Economy," Working Paper Series RP2006/31, World Institute for Development Economic Research (UNU-WIDER).
  7. Ian W. McLean, 2010. "Responding to Shocks: Australia's Institutions and Policies," School of Economics Working Papers 2010-30, University of Adelaide, School of Economics.
  8. Pedro Lains, 2007. "Before the Golden Age: Economic Growth in Mexico and Portugal, 1910–1950," NBER Chapters, in: The Decline of Latin American Economies: Growth, Institutions, and Crises, pages 59-82 National Bureau of Economic Research, Inc.
  9. Meissner, Christopher M., 2014. "Growth from Globalization? A View from the Very Long Run," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 8, pages 1033-1069 Elsevier.
  10. Sambit Bhattacharyya, 2008. "Trade Liberalization And Institutional Development," Departmental Working Papers 2008-13, The Australian National University, Arndt-Corden Department of Economics.
  11. Crafts, Nicholas & O’Rourke, Kevin Hjortshøj, 2014. "Twentieth Century Growth*This research has received funding from the European Research Council under the European Union’s Seventh Framework Programme (FP7/2007-2013) / ERC grant agreement no. 249546," Handbook of Economic Growth, in: Handbook of Economic Growth, edition 1, volume 2, chapter 6, pages 263-346 Elsevier.
  12. repec:cge:warwcg:57 is not listed on IDEAS
  13. Stojkov, Aleksandar & Zalduendo, Juan, 2011. "Europe as a convergence engine -- heterogeneity and investment opportunities in emerging Europe," Policy Research Working Paper Series 5837, The World Bank.
  14. Crafts, Nicholas, 2011. "Economic History Matters," CAGE Online Working Paper Series 58, Competitive Advantage in the Global Economy (CAGE).
  15. Richard Baldwin, 2013. "Trade and Industrialization after Globalization’s Second Unbundling: How Building and Joining a Supply Chain Are Different and Why it Matters," NBER Chapters, in: Globalization in an Age of Crisis: Multilateral Economic Cooperation in the Twenty-First Century, pages 165-212 National Bureau of Economic Research, Inc.

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