Why Did the Tariff-Growth Correlation Reverse after 1950?

64 Pages Posted: 14 Sep 2002 Last revised: 4 Aug 2022

See all articles by Michael A. Clemens

Michael A. Clemens

George Mason University; Peterson Institute for International Economics; IZA-Institute for the Study of Labor; Centre for Research and Analysis of Migration; Center for Global Development

Jeffrey G. Williamson

Harvard University - Department of Economics, Laird Bell Professor of Economics, Emeritus; Honorary Fellow, University of Wisconsin - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Date Written: September 2002

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

Clemens, Michael Andrew and Williamson, Jeffrey G., Why Did the Tariff-Growth Correlation Reverse after 1950? (September 2002). NBER Working Paper No. w9181, Available at SSRN: https://ssrn.com/abstract=330320

Michael Andrew Clemens

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