Misallocation and Productivity Effects of the Smoot-Hawley Tariff
Using a newly created microeconomic archive of U.S. imports at the tariff-line level for 1930-33, we construct industry-level tariff wedges incorporating the input-output structure of U.S. economy and the heterogenous role of imports across sectors of the economy. We use these wedges to show that the average tariff rate of 46% in 1933 substantially understated the true impact of the Smoot-Hawley (SH) tariff structure, which we estimate to be equivalent to a uniform tariff rate of 70%. We use these wedges to calculate the impact of the Smoot Hawley tariffs on total factor productivity and welfare. In our benchmark parameterization, we find that tariff protection reduced TFP by 1.2% relative to free trade prior to the Smoot Hawley legislation. TFP fell by an additional 0.5% between 1930 and 1933 due to Smoot Hawley. We also conduct counterfactual policy exercises and examine the sensitivity of our results to changes in the elasticity of substitution and the import share. A doubling of the substitution elasticities yields a TFP decline of almost 5% relative to free trade, with an additional reduction due to SH of 0.4%.
|Date of creation:||May 2012|
|Date of revision:|
|Publication status:||published as Eric Bond & Mario Crucini & Joel Rodrigue & Tristan Potter, 2013. "Misallocation and Productivity Effects of the Smoot-Hawley Tariff," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 120-134, January.|
|Note:||DAE IFM ITI|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Douglas A. Irwin, 1998.
"The Smoot-Hawley Tariff: A Quantitative Assessment,"
The Review of Economics and Statistics,
MIT Press, vol. 80(2), pages 326-334, May.
- Douglas A. Irwin, 1996. "The Smoot-Hawley Tariff: A Quantitative Assessment," NBER Working Papers 5509, National Bureau of Economic Research, Inc.
- James E. Anderson & J. Peter Neary, 2005. "Measuring the Restrictiveness of International Trade Policy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262012200, March.
- Orazio Attanasio & James Banks & Sarah Tanner, 1998.
"Asset holding and consumption volatility,"
IFS Working Papers
W98/08, Institute for Fiscal Studies.
- Andrew Atkeson & Ariel Burstein, 2010.
"Innovation, firm dynamics, and international trade,"
444, Federal Reserve Bank of Minneapolis.
- Andrew Atkeson & Ariel TomÃ¡s Burstein, 2010. "Innovation, Firm Dynamics, and International Trade," Journal of Political Economy, University of Chicago Press, vol. 118(3), pages 433-484, 06.
- Andrew Atkeson & Ariel Burstein, 2007. "Innovation, firm dynamics, and international trade," NBER Working Papers 13326, National Bureau of Economic Research, Inc.
- Andrew Atkeson & Ariel Burstein, 2007. "Innovation, Firm Dynamics, and International Trade," Levine's Working Paper Archive 122247000000001423, David K. Levine.
- Ariel Burstein & Andrew Atkeson, 2009. "Innovation, Firm Dynamics, and International Trade," 2009 Meeting Papers 186, Society for Economic Dynamics.
- Crucini, M.J. & Kahn, J., 1994.
"Tarrifs and Aggregate Economic Activity: Lessons from the Great Depression,"
RCER Working Papers
383, University of Rochester - Center for Economic Research (RCER).
- Crucini, Mario J. & Kahn, James, 1996. "Tariffs and aggregate economic activity: Lessons from the Great Depression," Journal of Monetary Economics, Elsevier, vol. 38(3), pages 427-467, December.
- Crucini, Mario J, 1994. "Sources of Variation in Real Tariff Rates: The United States, 1900-1940," American Economic Review, American Economic Association, vol. 84(3), pages 732-43, June.
- Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
- Raj Chetty & Adam Guren & Day Manoli & Andrea Weber, 2011.
"Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins,"
American Economic Review,
American Economic Association, vol. 101(3), pages 471-75, May.
- Chetty, Nadarajan & Weber, Andrea & Guren, Adam Michael & Day, Manoli, 2011. "Are Micro and Macro Labor Supply Elasticities Consistent? A Review of Evidence on the Intensive and Extensive Margins," Scholarly Articles 11878970, Harvard University Department of Economics.
- Arnaud Costinot & Andres Rodriguez-Clare & Costas Arkolakis, 2010.
"New Trade Models, Same Old Gains?,"
2010 Meeting Papers
433, Society for Economic Dynamics.
- Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014.
"Trade Reform in the Partially Liberalized Economy of Turkey,"
World Scientific Book Chapters,
in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 5, pages 95-121
World Scientific Publishing Co. Pte. Ltd..
- Harrison, Glenn W & Rutherford, Thomas F & Tarr, David G, 1993. "Trade Reform in the Partially Liberalized Economy of Turkey," World Bank Economic Review, World Bank Group, vol. 7(2), pages 191-217, May.
- Irwin, Douglas A, 1998. "Change in U.S. Tariffs: The Role of Import Prices and Commercial Policies," American Economic Review, American Economic Association, vol. 88(4), pages 1015-26, September.
- Tatsuo Hatta, 1977. "A Theory of Piecemeal Policy Recommendations," Review of Economic Studies, Oxford University Press, vol. 44(1), pages 1-21.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:18034. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.