Did Import Substitution Promote Growth in the Late Nineteenth Century?

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The positive correlation between import tariffs and economic growth across countries in the late nineteenth century suggests that tariffs may have played a causal role in promoting growth. This paper seeks to determine if high tariffs stimulated growth by shifting resources out of agriculture and into manufacturing. The most rapidly growing countries were indeed those that reduced the share of employment in agriculture. Tariffs in agricultural exporting (importing) countries may have promoted (retarded) this shift, although two high tariff, high growth, agricultural-exporting outliers (Argentina and Canada) experienced export-oriented growth and did not pursue import substitution policies. This raises the question of whether economic growth led to changes in the structure of employment rather than changes in employment leading to economic growth.

Published: Irwin, Douglas A. "Interpreting The Tariff-Growth Correlation Of The Late 19th Century," American Economic Review, 2002, v92(2,May), 165-169.

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