NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Optimal Tax on Antebellum U.S. Cotton Exports

Douglas A. Irwin

NBER Working Paper No. 8689
Issued in December 2001
NBER Program(s):   DAE   ITI

The United States produced about 80 percent of the world's cotton in the decades prior to the Civil War. How much monopoly power did the United States possess in the world cotton market and what would have been the effect of an optimal export tax? This paper estimates the elasticity of foreign demand for U.S. cotton exports and uses the elasticity in a simple partial equilibrium model to calculate the optimal export tax and its effect on prices, trade, and welfare. The results indicate that the export demand elasticity for U.S. cotton was about -1.7 and that the optimal export tax of about 50 percent would have raised U.S. welfare by about $6 million, about 0.1 percent of U.S. GDP or about 0.5 percent of the South's GDP.

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Document Object Identifier (DOI): 10.3386/w8689

Published: Irwin, Douglas A., 2003. "The optimal tax on antebellum US cotton exports," Journal of International Economics, Elsevier, vol. 60(2), pages 275-291, August.

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