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How Bad Are Trade Wars? Evidence from Tariffs

Author

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  • Petr Polak
  • Nikol Polakova
  • Anna Tlusta

Abstract

We use more than 1,600 estimates from 71 studies to investigate the relation between international trade flows and tariffs. Our results suggest that the empirical literature suffers from the presence of publication bias, which has exaggerated the effect (the true elasticity is closer to zero). After accounting for publication bias, we estimate the trade elasticity with respect to tariffs to be between -0.9 and -2.0. The results of Bayesian model averaging, which takes into account model uncertainty, show that the differences among estimates are systematically driven by the type of data (panel and level of aggregation), the data source (WITS vs. other databases), control variables (distance and trade agreements dummy), and estimation techniques (use of country-level fixed effects). The effect is also diminishing over time.

Suggested Citation

  • Petr Polak & Nikol Polakova & Anna Tlusta, 2020. "How Bad Are Trade Wars? Evidence from Tariffs," Working Papers 2020/15, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2020/15
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    More about this item

    Keywords

    BMA; international trade; meta-analysis; publication bias; tariffs; trade costs;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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