The Structure of Tariffs and Long-Term Growth
We show that the â€˜skill-biasâ€™ of a countryâ€™s tariff structure is positively correlated with long-term per capita GDP growth. Testing for causal mechanisms, we find evidence consistent with the existence of real benefits from tariffs focused in skill-intensive industries. However, this only accounts for a quarter of the total correlation between skill-biased tariffs and growth. Turning to alternative explanations, we extend the standard Grossman-Helpman â€˜protection-for-saleâ€™ model and show how the skill-bias of tariffs can reflect the extent of domestic rent-seeking activities in the economy. We provide evidence that the remaining variation is explained by this endogeneity.[Working Paper No.]
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