Tariffs and the Expansion of the American Pig Iron Industry, 1870-1940
This study quantifies dynamic learning effects behind the tariff wall in the American pig iron industry in 1870-1940. First, we present new datasets to argue that imported and domestic pig iron were close substitutes. Next, we provide evidence for dynamic learning effects. Finally, we use the estimated learning rate to simulate the hypothetical free trade regime starting in 1870. Despite substantial learning at the early stage of development, free trade would have wiped out the domestic industry by 1881. This would be caused by unfavorable shocks on demand, input costs and transport costs.
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