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Why Did the Tariff-Growth Correlation Reverse After 1950?

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  • Michael A. Clemens
  • Jeffrey G. Williamson

Abstract

This paper uses a new database to establish a key finding: high tariffs were associated with fast growth before World War II, while associated with slow growth thereafter. The paper offers some 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 oft-quoted Sachs-Warner result might be turned on its head in a world environment characterized by a moderately higher level of generalized tariff protection. We confirm the spirit of recent findings by Rodrik and Rodr¡guez that postwar tariffs need not be negatively correlated with growth in an unconditional fashion. Just a 4% increase in average tariff rates among trading partners might suffice to reverse any negative relationship between an average country's tariffs and its growth. An increase in own tariffs after 1970 hurt or at least didn't help growth, but it would have helped growth in a world where average trading partners' tariffs were moderately higher. The world environment matters. Leader-country reaction to big world events matters.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 9181.

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Date of creation: Sep 2002
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Publication status: published as Clemens, Michael A. and Jeffrey G. Williamson. "Why Did The Tariff-Growth Correlation Change After 1950?," Journal of Economic Growth, 2004, v9(1,Mar), 5-46.
Handle: RePEc:nbr:nberwo:9181

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  1. Krueger, Anne O., 1984. "Trade policies in developing countries," Handbook of International Economics, Elsevier, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 11, pages 519-569 Elsevier.
  2. Douglas A. Irwin, 2002. "Did Import Substitution Promote Growth in the Late Nineteenth Century?," NBER Working Papers 8751, National Bureau of Economic Research, Inc.
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Cited by:
  1. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 21(3), pages 131-154, Summer.
  2. Kym Anderson & Markus Bruckner, 2011. "Price Distortions and Economic Growth in Sub-Saharan Africa," School of Economics Working Papers 2011-32, University of Adelaide, School of Economics.
  3. James E. Rauch, 2007. "Development Through Synergistic Reform," NBER Working Papers 13170, National Bureau of Economic Research, Inc.
  4. Michael Hinton & Thomas Barbiero, 2012. "Is Protection Good or Bad for Growth? Lessons from Canada's Cotton Textile Mills," Working Papers, Ryerson University, Department of Economics 036, Ryerson University, Department of Economics, revised Oct 2012.
  5. Stéphane BECUWE (GREThA, CNRS, UMR 5113) & Bertrand BLANCHETON (GREThA, CNRS, UMR 5113, 2011. "Tariff growth paradox between 1850 and 1913: a critical survey (In French)," Cahiers du GREThA, Groupe de Recherche en Economie Théorique et Appliquée 2011-24, Groupe de Recherche en Economie Théorique et Appliquée.
  6. Lone Engbo Christiansen & Thierry Tressel & Martin Schindler, 2009. "Growth and Structural Reforms," IMF Working Papers 09/284, International Monetary Fund.

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