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Why Did the Tariff-Growth Correlation Reverse After 1950?

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  • Michael A. Clemens
  • Jeffrey G. Williamson

Abstract

This paper uses a new database to establish a key finding: high tariffs were associated with fast growth before World War II, while associated with slow growth thereafter. The paper offers some explanations for the sign switch by controlling for novel measures of the changing world economic environment. Rejecting alternative explanations based on changing export market growth or transportation cost declines, it shows how the oft-quoted Sachs-Warner result might be turned on its head in a world environment characterized by a moderately higher level of generalized tariff protection. We confirm the spirit of recent findings by Rodrik and Rodr¡guez that postwar tariffs need not be negatively correlated with growth in an unconditional fashion. Just a 4% increase in average tariff rates among trading partners might suffice to reverse any negative relationship between an average country's tariffs and its growth. An increase in own tariffs after 1970 hurt or at least didn't help growth, but it would have helped growth in a world where average trading partners' tariffs were moderately higher. The world environment matters. Leader-country reaction to big world events matters.

Suggested Citation

  • Michael A. Clemens & Jeffrey G. Williamson, 2002. "Why Did the Tariff-Growth Correlation Reverse After 1950?," NBER Working Papers 9181, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9181
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    File URL: http://www.nber.org/papers/w9181.pdf
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    References listed on IDEAS

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    1. Douglas A. Irwin, 2002. "Did Import Substitution Promote Growth in the Late Nineteenth Century?," NBER Working Papers 8751, National Bureau of Economic Research, Inc.
    2. Krueger, Anne O., 1984. "Trade policies in developing countries," Handbook of International Economics,in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 11, pages 519-569 Elsevier.
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    Citations

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    Cited by:

    1. Benjamin Bridgman, 2008. "Energy Prices and the Expansion of World Trade," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 904-916, October.
    2. Christiansen, Lone & Schindler, Martin & Tressel, Thierry, 2013. "Growth and structural reforms: A new assessment," Journal of International Economics, Elsevier, vol. 89(2), pages 347-356.
    3. Stéphane BECUWE (GREThA, CNRS, UMR 5113) & Bertrand BLANCHETON (GREThA, CNRS, UMR 5113, 2011. "Tariff growth paradox between 1850 and 1913: a critical survey (In French)," Cahiers du GREThA 2011-24, Groupe de Recherche en Economie Théorique et Appliquée.
    4. Paola Giuliano & Prachi Mishra & Antonio Spilimbergo, 2013. "Democracy and Reforms: Evidence from a New Dataset," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 179-204, October.
    5. Rauch, James E., 2010. "Development through synergistic reforms," Journal of Development Economics, Elsevier, vol. 93(2), pages 153-161, November.
    6. Anderson, Kym & Brückner, Markus, 2011. "Price Distortions and Economic Growth in Sub-Saharan Africa," CEPR Discussion Papers 8530, C.E.P.R. Discussion Papers.
    7. David Hummels, 2007. "Transportation Costs and International Trade in the Second Era of Globalization," Journal of Economic Perspectives, American Economic Association, vol. 21(3), pages 131-154, Summer.
    8. Michael Hinton & Thomas Barbiero, 2012. "Is Protection Good or Bad for Growth? Lessons from Canada's Cotton Textile Mills," Working Papers 036, Ryerson University, Department of Economics, revised Oct 2012.
    9. repec:taf:rehdxx:v:32:y:2017:i:1:p:71-95 is not listed on IDEAS
    10. Lucas Pedreira do Couto Ferraz & Eduardo Haddad, 2008. "On the effects of scale economies and import barriers on Brazilian trade performance and growth: an interstate CGE analysis," Anais do XXXVI Encontro Nacional de Economia [Proceedings of the 36th Brazilian Economics Meeting] 200807201837170, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • N7 - Economic History - - Economic History: Transport, International and Domestic Trade, Energy, and Other Services

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