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Protectionism and Economic Growth: Causal Evidence from the First Era of Globalization

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  • Niklas Potrafke

    ()

  • Fabian Ruthardt
  • Kaspar Wüthrich
  • Fabian Ruthardt

    ()

Abstract

We investigate how protectionist policies influence economic growth. Our empirical strategy exploits an extraordinary tax scandal that gave rise to an unexpected change of government in Sweden. A free-trade majority in parliament was overturned by a protectionist majority in 1887. We employ the synthetic control method to select control countries against which economic growth in Sweden can be compared. We do not find evidence suggesting that protectionist policies influenced economic growth and examine channels why. Tariffs increased government revenue. However, the results do not suggest that the protectionist government stimulated the economy in the short-run by increasing government expenditure.

Suggested Citation

  • Niklas Potrafke & Fabian Ruthardt & Kaspar Wüthrich & Fabian Ruthardt, 2020. "Protectionism and Economic Growth: Causal Evidence from the First Era of Globalization," CESifo Working Paper Series 8759, CESifo.
  • Handle: RePEc:ces:ceswps:_8759
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    Cited by:

    1. Niklas Potrafke & Kaspar Wuthrich, 2020. "Green governments," Papers 2012.09906, arXiv.org.

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    More about this item

    Keywords

    protectionism; economic growth; first era of globalization; synthetic control method; causal inference;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F10 - International Economics - - Trade - - - General
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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