The Impact of Interwar Protection: Evidence from India
Research on the quantitative impact of interwar protection on trade flows remains scarce, and much of it has concluded that the impact was surprisingly small. In this paper we ask: Did Indian interwar protection hurt UK manufacturers, by raising tariffs on manufactured imports? Or did it favour UK interests, by discriminating against “foreign” (i.e. non- British) producers? We answer this question by quantifying the impact of trade policy on the value and composition of Indian imports, using novel disaggregated data on both trade policies and imports for 114 commodity categories coming from 42 countries. Indian trade elasticities were generally larger than those in the United Kingdom at the same time. We find that even though Indian protection lowered total imports, it substantially boosted imports from the UK. Trade policy had a big impact on trade flows.
O’Rourke gratefully acknowledges the financial support of the ERC, under the European Union’s Seventh Framework Programme (FP7/2007-2013), ERC grant agreement no. 249546; the Oxford History Faculty’s Sanderson Fund; and the John Fell OUP Research Fund. We are extremely grateful to Emma Mathieson and the rest of the staff of the Bodleian Library and Oxford’s Oriental Institute Library for their generous assistance in locating material. Aileen Mooney’s help was invaluable in getting financial support for the project and we thank her most sincerely. We are also very grateful to Bob Allen, Mike Bordo, Luis Catao, Mary Cox, Ron Davies, Alan de Bromhead, Alan Fernihough, James Foreman-Peck, Paulo Guimarães, Bishnu Gupta, Stefanie Haller, Jean Imbs, Chris Meissner, Chris Minns, Ferdinand Rauch, Tirthankar Roy, Alan Taylor, and Susan Wolcott for answering our questions, sharing data, providing comments, and helping us in a variety of other ways. A special word of thanks is due to Alex Green, Thea Don-Siemion, and Brian Varian for finding data for us in the LSE library. We benefitted from some great comments when presenting this work at Cardiff University, the University of Warwick, the 2019 Economic History Society annual conference in Belfast, and the Dublin Trade Group and thank all concerned. The usual disclaimer applies. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.