When is Trade Protection Good for Growth?

Abstract

The empirical relationship between trade protection and economic growth is surprisingly fragile, as shown in a number of other papers. After demonstrating this empirical sensitivity, we address one possible explanation for these findings: that the relationship is nonlinear. Following the endogenous growth literature, we test for the possibility that the relationship between trade barriers and growth is contingent on measures of comparative advantage. The findings suggest that these nonlinearities do in fact exist - in particular, the correlation between tariffs and growth is strongest and positive for capital-abundant countries - and are robust to the choice of control variables.

Keywords: Comparative advantage, economic growth, tariffs, total factor productivity

JEL Classification: F13, F43, O19, O24