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American Economic Journal: Macroeconomics: Vol. 2 No. 4 (October 2010)

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The Structure of Tariffs and Long-Term Growth

Article Citation

Nunn, Nathan, and Daniel Trefler. 2010. "The Structure of Tariffs and Long-Term Growth." American Economic Journal: Macroeconomics, 2(4): 158-94.

DOI: 10.1257/mac.2.4.158

Abstract

We show that the "skill bias" of a country's tariff structure is positively correlated with long-term per capita GDP growth. Testing for causal mechanisms, we find evidence consistent with the existence of real benefits from tariffs focused in skill-intensive industries. However, this only accounts for a quarter of the total correlation between skill-biased tariffs and growth. Turning to alternative explanations, we extend the standard Grossman-Helpman "protection-for- sale" model and show how the skill bias of tariffs can reflect the extent of domestic rent-seeking activities in the economy. We provide evidence that the remaining variation is explained by this endogeneity. (JEL D72, F13, F43, O17, O19, O24, O47)

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Authors

Nunn, Nathan (Harvard U and BREAD)
Trefler, Daniel (U Toronto and CIFAR)

JEL Classifications

D72: Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
F13: Trade Policy; International Trade Organizations
F43: Economic Growth of Open Economies
O17: Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
O19: International Linkages to Development; Role of International Organizations
O24: Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy
O47: Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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