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Interpreting the Tariff-Growth Correlation of the Late Nineteenth Century

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  • Douglas A. Irwin

Abstract

Recent research has documented a positive relationship between tariffs and growth in the late nineteenth century. Such a correlation does not establish a causal relationship between tariffs and growth, but it is tempting to view the correlation as constituting evidence that protectionist or inward-oriented trade strategies were successful during this period. This paper argues that such a conclusion is unwarranted and that the tariff-growth correlation should be interpreted with care. First, several individual country experiences in the late nineteenth century are not consistent with the view that import substitution promoted growth. For example, the two most rapidly expanding, high tariff countries of the period Argentina and Canada grew because capital imports helped stimulate export-led growth in agricultural staples products, not because of protectionist trade policies. Second, most land-abundant countries (such as Argentina and Canada) imposed high tariffs to raise government revenue, and revenue tariffs have a different structure than protective tariffs. The fact that labor-scarce, land-abundant countries had a high potential for growth and also tended to impose high revenue-generating tariffs confounds the inference that high tariffs were responsible for their strong economic performance during this period.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8739.

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Date of creation: Jan 2002
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Publication status: published as Irwin, Douglas A. "Interpreting The Tariff-Growth Correlation Of The Late 19th Century," American Economic Review, 2002, v92(2,May), 165-169.
Handle: RePEc:nbr:nberwo:8739

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  1. Krueger, Anne O, 1997. "Trade Policy and Economic Development: How We Learn," American Economic Review, American Economic Association, vol. 87(1), pages 1-22, March.
  2. Douglas A. Irwin, 2000. "Tariffs and Growth in Late Nineteenth Century America," NBER Working Papers 7639, National Bureau of Economic Research, Inc.
  3. O'Rourke, K, 1997. "Tariffs and Growth in the Late 19th Century," Papers 97/18, College Dublin, Department of Political Economy-.
  4. Morris, Cynthia Taft & Adelman, Irma, 1989. "Nineteenth-century development experience and lessons for today," World Development, Elsevier, vol. 17(9), pages 1417-1432, September.
  5. Irwin, Douglas A., 1993. "Free Trade and Protection in Nineteenth-Century Britain and France Revisited: A Comment on Nye," The Journal of Economic History, Cambridge University Press, vol. 53(01), pages 146-152, March.
  6. Estevadeordal, Antoni, 1997. "Measuring protection in the early twentieth century," European Review of Economic History, Cambridge University Press, vol. 1(01), pages 89-125, April.
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Cited by:
  1. Antonio Tena Junguito, 2006. "Tariff History Lessons from the European Periphery. Protection Intensity and the Infant Industry Argument in Spain and Italy 1870-1930," Working Papers in Economic History wp06-08, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
  2. Nathan Nunn & Daniel Trefler, 2010. "The Structure of Tariffs and Long-Term Growth," Working Papers id:2614, eSocialSciences.
  3. Ann Harrison & Andrés Rodríguez-Clare, 2009. "Trade, Foreign Investment, and Industrial Policy for Developing Countries," NBER Working Papers 15261, National Bureau of Economic Research, Inc.
  4. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October.
  5. 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.
  6. Dan Liu & Christopher M. Meissner, 2013. "Market Potential and the Rise of US Productivity Leadership," NBER Working Papers 18819, National Bureau of Economic Research, Inc.
  7. Léo CHARLES, 2013. "Why did Switzerland succeed? An analysis of Swiss specializations (1885-1905)," Cahiers du GREThA 2013-15, Groupe de Recherche en Economie Théorique et Appliquée.
  8. Chen, Been-Lon & Lee, Shun-Fa, 2007. "Import Tariffs and Growth in a Model with Habits," MPRA Paper 27667, University Library of Munich, Germany.
  9. Antonio Tena Junguito, 2008. "Bairoch revisited. Tariff structure and growth in the late 19th century," Working Papers in Economic History wp08-04, Universidad Carlos III, Departamento de Historia Económica e Instituciones.
  10. Yilmaz Akyuz, 2005. "The WTO Negotiations on Industrial Tariffs: What is at Stake for Developing Countries?," Working Papers 2005/8, Turkish Economic Association.
  11. Yilmaz Akyüz, 2005. "The WTO Negotiations on Industrial Tariffs : What is at Stake for Developing Countries?," Trade Working Papers 22080, East Asian Bureau of Economic Research.
  12. Douglas A. Irwin, 2002. "Did Import Substitution Promote Growth in the Late Nineteenth Century?," NBER Working Papers 8751, National Bureau of Economic Research, Inc.
  13. Tasso Adamopoulos, 2008. "Land Inequality and the Transition to Modern Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 257-282, April.
  14. Moritz Schularick & Solomos Solomou, 2011. "Tariffs and economic growth in the first era of globalization," Journal of Economic Growth, Springer, vol. 16(1), pages 33-70, March.
  15. Lee, Shun-Fa, 2010. "Tariff, Growth, and Welfare," MPRA Paper 27486, University Library of Munich, Germany.

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