Tariff Incidence in America's Gilded Age

36 Pages Posted: 20 Jul 2006 Last revised: 26 Sep 2010

See all articles by Douglas A. Irwin

Douglas A. Irwin

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

Date Written: April 2006

Abstract

In the late nineteenth century, the United States imposed high tariffs to protect domestic manufacturers from foreign competition. This paper examines the magnitude of protection given to import-competing producers and the costs imposed on export-oriented producers by focusing on changes in the domestic prices of traded goods relative to non-traded goods. Because the tariffs tended to increase the prices of non-traded goods, the degree of protection was much less than indicated by nominal rates of protection; the results here suggest that the 30 percent average tariff on imports yielded a 15 percent implicit subsidy to import-competing producers while effectively taxing exporters at a rate of 11 percent. The paper also finds that tariff policy redistributed large amounts of income (about 9 percent of GDP) across groups, although the impact on consumers was only slightly negative because they devoted a sizeable share of their expenditures to exportable goods. These findings may explain why import-competing producers pressed for even greater protection in the face of already high tariffs and why consumers (as voters) did not strongly oppose the policy.

Suggested Citation

Irwin, Douglas A., Tariff Incidence in America's Gilded Age (April 2006). NBER Working Paper No. w12162. Available at SSRN: https://ssrn.com/abstract=896470

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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