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Using the gravity model to estimate the costs of protection

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  • Howard J. Wall

Abstract

Many economists expend a lot of energy decrying trade protectionism; nonetheless, their estimates of the actual burden that protectionism imposes on the economy have been surprisingly small. In this article, Howard J. Wall presents a method that captures some of the effects and distortions of trade protection which have not been captured by existing methods. Wall finds that during 1996, worldwide protectionism reduced U.S. exports by 26.2 percent. Likewise, U.S. protectionism decreased U.S. imports from non-NAFTA countries by 15.4 percent. He calculates further that the welfare cost of U.S. protectionism amounted to about 1.45 percent of U.S. national income, which is much higher than previous estimates.

Suggested Citation

  • Howard J. Wall, 1999. "Using the gravity model to estimate the costs of protection," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 33-40.
    • Handle: RePEc:fip:fedlrv:y:1999:i:jan:p:33-40:n:1
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    References listed on IDEAS

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    1. Tamim Bayoumi & Barry Eichengreen, 1997. "Is Regionalism Simply a Diversion? Evidence from the Evolution of the EC and EFTA," NBER Chapters,in: Regionalism versus Multilateral Trade Arrangements, pages 141-168 National Bureau of Economic Research, Inc.
    2. Baldwin, Robert E., 1984. "Trade policies in developed countries," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 12, pages 571-619 Elsevier.
    3. Robert W. Staiger & Frank A. Wolak, 1994. "Measuring Industry-Specific Protection: Antidumping in the United States," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 25(1994 Micr), pages 51-118.
    4. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-481, August.
    5. I-Hui Cheng & Howard J. Wall, 2005. "Controlling for heterogeneity in gravity models of trade and integration," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 49-63.
    6. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters,in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    7. Gary Clyde Hufbauer & Kimberly Ann Elliott, 1994. "Measuring the Costs of Protection in the United States," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 77, September.
    8. Robert C. Feenstra, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 159-178, Summer.
    9. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-116, March.
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