NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Misallocation and Productivity Effects of the Smoot-Hawley Tariff

Eric W. Bond, Mario J. Crucini, Tristan Potter, Joel Rodrigue

NBER Working Paper No. 18034
Issued in May 2012
NBER Program(s):   DAE   IFM   ITI

Using a newly created microeconomic archive of U.S. imports at the tariff-line level for 1930-33, we construct industry-level tariff wedges incorporating the input-output structure of U.S. economy and the heterogenous role of imports across sectors of the economy. We use these wedges to show that the average tariff rate of 46% in 1933 substantially understated the true impact of the Smoot-Hawley (SH) tariff structure, which we estimate to be equivalent to a uniform tariff rate of 70%. We use these wedges to calculate the impact of the Smoot Hawley tariffs on total factor productivity and welfare. In our benchmark parameterization, we find that tariff protection reduced TFP by 1.2% relative to free trade prior to the Smoot Hawley legislation. TFP fell by an additional 0.5% between 1930 and 1933 due to Smoot Hawley. We also conduct counterfactual policy exercises and examine the sensitivity of our results to changes in the elasticity of substitution and the import share. A doubling of the substitution elasticities yields a TFP decline of almost 5% relative to free trade, with an additional reduction due to SH of 0.4%.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.

Information about Free Papers

You should expect a free download if you are a subscriber, a corporate associate of the NBER, a journalist, an employee of the U.S. federal government with a ".GOV" domain name, or a resident of nearly any developing country or transition economy.

If you usually get free papers at work/university but do not at home, you can either connect to your work VPN or proxy (if any) or elect to have a link to the paper emailed to your work email address below. The email address must be connected to a subscribing college, university, or other subscribing institution. Gmail and other free email addresses will not have access.

E-mail:

Acknowledgments

Machine-readable bibliographic record - MARC, RIS, BibTeX

Published: Eric Bond & Mario Crucini & Joel Rodrigue & Tristan Potter, 2013. "Misallocation and Productivity Effects of the Smoot-Hawley Tariff," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(1), pages 120-134, January.

Users who downloaded this paper also downloaded these:
Kalemli-Ozcan and Sorensen w18030 Misallocation, Property Rights, and Access to Finance: Evidence from Within and Across Africa
Edmond, Midrigan, and Xu w18041 Competition, Markups, and the Gains from International Trade
Eichengreen w2001 The Political Economy of the Smoot-Hawley Tariff
Blonigen, Piger, and Sly w18032 Comovement in GDP Trends and Cycles Among Trading Partners
Collard-Wexler, Asker, and De Loecker w17175 Productivity Volatility and the Misallocation of Resources in Developing Economies
 
Publications
Activities
Meetings
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us