TY  - JOUR
AU  - Bagwell,Kyle
AU  - Staiger,Robert W.
TI  - Protection and the Business Cycle
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5168
PY  - 1995
Y2  - July 1995
UR  - http://www.nber.org/papers/w5168
L1  - http://www.nber.org/papers/w5168.pdf
N1  - Author contact info:
Kyle Bagwell
Department of Economics
Stanford University
Landau Economics Building
579 Serra Mall
Stanford, CA 94305-6072
Tel: (650) 723-3251
E-Mail: kbagwell@stanford.edu

Robert W. Staiger
Department of Economics
Stanford University
Landau Economics Building
579 Serra Mall
Stanford, CA  94305-6072
Tel: 650/723-0533
Fax: 650/725-5702
E-Mail: rstaiger@stanford.edu
AB  - Empirical studies have repeatedly documented the countercyclical nature of trade barriers.  In this paper, we propose a simple theoretical framework that is consistent with this and other empirical regularities in the relationship between protection and the business cycle.  We examine the ability of countries to maintain efficiency- enhancing reciprocal trade agreements that control their temptation to resort to beggar-thy-neighbor policies, under the requirement that such agreements are self-enforcing.  We find theoretical support for countercyclical movements in protection levels, as the fast growth in trade volume that is associated with a boom phase facilitates the maintenance of more liberal trade policies that can be sustained during a recession phase in which growth is slow.  However, we also find that acyclical increases in the level of trade volume give rise to protection, implying that whether rising imports are met with greater liberalization or increased protection depends on whether they are part of a cyclic upward trend in trade volume or an acyclical increase in import levels.
ER  -