The Optimal Tax on Antebellum U.S. Cotton Exports

29 Pages Posted: 20 Dec 2001

See all articles by Douglas A. Irwin

Douglas A. Irwin

Dartmouth College - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2001

Abstract

The United States produced about 80 percent of the world's cotton in the decades prior to the Civil War. How much monopoly power did the United States possess in the world cotton market and what would have been the effect of an optimal export tax? This paper estimates the elasticity of foreign demand for U.S. cotton exports and uses the elasticity in a simple partial equilibrium model to calculate the optimal export tax and its effect on prices, trade, and welfare. The results indicate that the export demand elasticity for U.S. cotton was about -1.7 and that the optimal export tax of about 50 percent would have raised U.S. welfare by about $6 million, about 0.1 percent of U.S. GDP or about 0.5 percent of the South's GDP.

Suggested Citation

Irwin, Douglas A., The Optimal Tax on Antebellum U.S. Cotton Exports (December 2001). NBER Working Paper No. w8689. Available at SSRN: https://ssrn.com/abstract=294738

Douglas A. Irwin (Contact Author)

Dartmouth College - Department of Economics ( email )

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National Bureau of Economic Research (NBER)

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