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Trade Policy and Structural Change

Author

Listed:
  • Hayato Kato
  • Kensuke Suzuki
  • Motoaki Takahashi
  • Hayato Kato

Abstract

We examine how tariffs affect sectoral composition and welfare in an economy with nonhomothetic preferences and sectors being complements---key drivers of structural change. Beyond their conventional role in trade protection, tariffs influence industrial structure by altering relative prices and income levels. We qualitatively characterize these mechanisms and use a quantitative dynamic model to show that a counterfactual 20-percentage-point increase in U.S. manufacturing tariffs since 2001 would have raised the manufacturing value-added share by one percentage point and increased welfare by 0.36 percent. However, if all the U.S. trading partners responded reciprocally, U.S. welfare would decline by 0.12 percent.

Suggested Citation

  • Hayato Kato & Kensuke Suzuki & Motoaki Takahashi & Hayato Kato, 2025. "Trade Policy and Structural Change," CESifo Working Paper Series 12050, CESifo.
    • Handle: RePEc:ces:ceswps:_12050
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    Keywords

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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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