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Welfare Effects of British Free Trade: Debate and Evidence from the 1840s

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  • Irwin, Douglas A

Abstract

Classical economists engaged in a vigorous debate over whether Britain's tariff reductions in the 1840s should be made contingent on tariff liberalization abroad. Some, notably Robert Torrens, believed that a unilateral tariff reduction would so deteriorate British terms of trade as to outweigh efficiency gains and make the country worse off. In this paper, Britain's foreign trade elasticities are estimated for this period in a simultaneous equation model. They are used in a simple general equilibrium model that explicitly takes the terms of trade into account to assess the welfare impact of tariff reductions. The results indicate that Britain would have been made worse off from a unilateral tariff reduction. However, foreign tariff reductions mitigated the terms of trade deterioration and could easily have made Britain better off. Copyright 1988 by University of Chicago Press.

Suggested Citation

  • Irwin, Douglas A, 1988. "Welfare Effects of British Free Trade: Debate and Evidence from the 1840s," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1142-1164, December.
    • Handle: RePEc:ucp:jpolec:v:96:y:1988:i:6:p:1142-64
    DOI: 10.1086/261581
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    Cited by:

    1. Rodney D. Ludema & Daniel E. Coates, 1998. "Unilateral Trade Liberalization as Leadership in Trade Negotiations," International Trade 9802002, University Library of Munich, Germany.
    2. Yoshiaki Sugimoto, 2006. "Endogenous Trade Policy: Political Struggle in the Growth Process," ISER Discussion Paper 0678, Institute of Social and Economic Research, Osaka University.
    3. John H. Coatsworth & Jeffrey G. Williamson, 2002. "The Roots of Latin American Protectionism: Looking Before the Great Depression," NBER Working Papers 8999, National Bureau of Economic Research, Inc.
    4. Peter H. Lindert & Jeffrey G. Williamson, 2002. "Mondialisation et inégalité : une longue histoire," Revue d’économie du développement, De Boeck Université, vol. 10(1), pages 7-41.
    5. repec:hal:wpspec:info:hdl:2441/670 is not listed on IDEAS
    6. Douglas A. Irwin, 1991. "Retrospectives: Challenges to Free Trade," Journal of Economic Perspectives, American Economic Association, vol. 5(2), pages 201-208, Spring.
    7. repec:spo:wpecon:info:hdl:2441/670 is not listed on IDEAS
    8. Tony Ward, 2004. "The Corn Laws and English wheat prices, 1815–1846," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 32(3), pages 245-255, September.
    9. Douglas A. Irwin, 1990. "Free trade at risk? An historical perspective," International Finance Discussion Papers 391, Board of Governors of the Federal Reserve System (U.S.).
    10. Peter H. Lindert & Jeffrey G. Williamson, 2003. "Does Globalization Make the World More Unequal?," NBER Chapters, in: Globalization in Historical Perspective, pages 227-276, National Bureau of Economic Research, Inc.
    11. Flandreau, Marc & Accominotti, Olivier, 2005. "Does Bilateralism Promote Trade? Nineteenth Century Liberalization Revisited," CEPR Discussion Papers 5423, C.E.P.R. Discussion Papers.
    12. Erdenebat Bataa & Andrew Vivian & Mark Wohar, 2019. "Changes in the relationship between short‐term interest rate, inflation and growth: evidence from the UK, 1820–2014," Bulletin of Economic Research, Wiley Blackwell, vol. 71(4), pages 616-640, October.
    13. Gabriel Felbermayr & Benjamin Jung & Wilhelm Kohler & Philipp Harms & Jakob Schwab, 2017. "Ricardo – Yesterday and Today," ifo Schnelldienst, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 70(09), pages 03-18, May.
    14. Paul R. Bergin & Reuven Glick & Alan M. Taylor, 2017. "Productivity, Tradability, and the Long-Run Price Puzzle," World Scientific Book Chapters, in: International Macroeconomic Interdependence, chapter 8, pages 211-248, World Scientific Publishing Co. Pte. Ltd..
    15. Coates, Daniel E. & Ludema, Rodney D., 2001. "A theory of trade policy leadership," Journal of Development Economics, Elsevier, vol. 65(1), pages 1-29, June.
    16. Ejrnã†S, Mette & Persson, Karl Gunnar, 2010. "The gains from improved market efficiency: trade before and after the transatlantic telegraph," European Review of Economic History, Cambridge University Press, vol. 14(3), pages 361-381, December.
    17. Christian Broda & Nuno Limão & David E. Weinstein, 2018. "Optimal Tariffs and Market Power: The Evidence," World Scientific Book Chapters, in: Policy Externalities and International Trade Agreements, chapter 2, pages 13-46, World Scientific Publishing Co. Pte. Ltd..
    18. N. F. R. Crafts & C. Knick Harley, 2002. "Precocious British Industrialization: A General Equilibrium Perspective," University of Western Ontario, Departmental Research Report Series 200213, University of Western Ontario, Department of Economics.
    19. Coates, Daniel E. & Ludema, Rodney D., 1995. "Unilateral tariff reduction as leadership in the political economy of trade negotiations," Discussion Papers, Series II 276, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    20. Douglas A. Irwin & Maksym G. Chepeliev, 2020. "The Economic Consequences of Sir Robert Peel: A Quantitative Assessment of the Repeal of the Corn Laws," NBER Working Papers 28142, National Bureau of Economic Research, Inc.
    21. Yoshiaki Sugimoto, 2005. "Endogenous Globalization and Income Divergence," Development and Comp Systems 0503003, University Library of Munich, Germany.
    22. Yousef, Tarik M., 2000. "The Political Economy of Interwar Egyptian Cotton Policy," Explorations in Economic History, Elsevier, vol. 37(4), pages 301-325, October.
    23. repec:hal:spmain:info:hdl:2441/670 is not listed on IDEAS

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