In the late nineteenth century, the United States imposed high tariffs to protect domestic manufacturers from foreign competition. This paper examines the magnitude of protection given to import-competing producers and the costs imposed on export-oriented producers by focusing on changes in the domestic prices of traded goods relative to non-traded goods. Because the tariffs tended to increase the prices of non-traded goods, the degree of protection was much less than indicated by nominal rates of protection; the results here suggest that the 30 percent average tariff on imports yielded a 15 percent implicit subsidy to import-competing producers while effectively taxing exporters at a rate of 11 percent. The paper also finds that tariff policy redistributed large amounts of income (about 9 percent of GDP) across groups, although the impact on consumers was only slightly negative because they devoted a sizeable share of their expenditures to exportable goods. These findings may explain why import-competing producers pressed for even greater protection in the face of already high tariffs and why consumers (as voters) did not strongly oppose the policy.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
12162.
Length: Date of creation: Apr 2006 Date of revision: Handle: RePEc:nbr:nberwo:12162
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Find related papers by JEL classification: F1 - International Economics - - Trade N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services
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