Tax Britannica: Nineteenth Century Tariffs And British National Income

Abstract:     
The literature on British economic history presumes that Britain was a free trader after the repeal of the Corn Laws. Thus her tariff levels were below those which were optimal for maximizing utility. Presumably, if the optimal British tariff was positive and greater than the levels established by mid-century, a reduction to zero of all tariffs that remained would have lowered British welfare even further. In this paper, we use a simple computable general equilibrium model to simulate a drop in all British tariffs to zero. The resulting substantial net increase in British welfare suggests that British tariffs were much higher than would be consistent with an optimum tariff policy. More important, the size of British losses from her high tariff levels suggest that British policy was not consistent with the stance of an ideological free trader.

Keywords: Britain, optimal tariff, free trade, protectionism, Corn Laws, Trade Restrictiveness Index, simulations, computable general equilibrium

JEL Classifications: C68, D58, F13, H21, N43

Working Paper Series