Measuring the Impact of Trade Protection on Industrial Production Size
39 Pages Posted: 18 Jan 2007 Last revised: 2 Jan 2008
Date Written: Dec. 31, 2007
Trade theory has no clear prediction on how import protection affects an importing sector's relative size. In this paper, we estimate the impact of U.S. trade protection on industrial production relative size based on a translog GDP functional system. Using an industrial panel data set and controlling for factor endowments and technology improvement, we find empirical evidence that trade protection does not help much increase a sector's relative size. In particular, in some industries like garments, high trade protection leads to low industrial size. Such findings are also robust to both the inclusion of the role of political economy and the coverage of various non-tariff measures as proxies of industrial protection.
Keywords: Industrial Output Share, Tariff, Non-tariff Barriers, Translog GDP Function
JEL Classification: F13, F14
Suggested Citation: Suggested Citation