Journal article
Misallocation and productivity effects of the Smoot–Hawley tariff
Review of economic dynamics, v 16(1), pp 120-134
Jan 2013
Featured in Collection : UN Sustainable Development Goals @ Drexel
Abstract
Using a newly created microeconomic archive of US imports at the tariff line level for 1930–1933, we construct industry-level tariff wedges incorporating the input–output structure of US economy and the heterogeneous 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%.
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Details
- Title
- Misallocation and productivity effects of the Smoot–Hawley tariff
- Creators
- Eric W. Bond - Vanderbilt UniversityMario J. Crucini - Vanderbilt UniversityTristan Potter - Boston CollegeJoel Rodrigue - Vanderbilt University
- Publication Details
- Review of economic dynamics, v 16(1), pp 120-134
- Publisher
- Elsevier
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Economics (School of Economics)
- Web of Science ID
- WOS:000313382800008
- Scopus ID
- 2-s2.0-84871918378
- Other Identifier
- 991021867156704721
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- Collaboration types
- Domestic collaboration
- Web of Science research areas
- Economics