The Political Economy of the Tariff Cycle

Cassing, James; McKeown, Timothy J.; Ochs, Jack

doi:10.2307/1960541

Cited by 84 publications

(32 citation statements)

References 22 publications

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“…The political economy literature indicates that the average level of protection tends to rise during economic recessions. This is because, for example, governments face increasing pressure to secure domestic market for domestic firms (Cassing, McKeown, and Ochs, 1986) or to counter incentives to manipulate the terms-of-trade (Bagwell and Staiger, 2003). The empirical evidence in general supports this claim (Bohara and Kaempfer, 1991;Grilli, 1988;Knetter and Prusa, 2003).…”

Section: Extending the Model To Economic Policy And Institutional Dementioning

confidence: 98%

Trade Policy Uncertainty and the WTO

Groppo

Piermartini

2014

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Bagwell and Staiger (1990) to specify our empirical model for the probability of a tariff increase. We then study how WTO tariff commitments affect this probability. We estimate our model using a database of WTO bound tariffs that we built for all WTO Members from 1996 to 2011 at the HS 6-digit level of disaggregation. Our results show that WTO commitments significantly reduce the probability of a tariff increase, even when the bound tariff is above the MFN applied rate. In addition, the WTO reduces trade policy uncertainty through its monitoring function. These results are robust to including political economy explanations of tariff changes and to addressing endogeneity concerns. Terms of use: Documents in

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Section: Extending the Model To Economic Policy And Institutional Dementioning

confidence: 98%

Trade Policy Uncertainty and the WTO

Groppo

Piermartini

2014

SSRN Journal

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“…Cassing et al (1986) relies on regional differences in the composition of immobile production factors. It is challenging for such a theory to explain a switch in the cyclicality of protectionism, since regionalism is sluggish.…”

Section: As a Response To Pressure From Import Competitorsmentioning

confidence: 99%

The march of an economic idea? Protectionism isn't counter-cyclic (anymore)

Rose¹

2013

Econ Policy

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Conventional wisdom holds that protectionism is counter-cyclic; tariffs, quotas and the like grow during recessions. While that may have been a valid description of the data before the First World War, it is now inaccurate. Since the Second World War, protectionism has not been counter-cyclic; tariffs and non-tariff barriers simply do not rise systematically during downturns. I document this new stylized fact with a panel of data covering over 180 countries and 40 years, using over a dozen measures of protectionism and six of business cycles. I test and reject a number of potential reasons why protectionism is no longer counter-cyclic. A "diagnosis of exclusion" leads me to believe that modern economics may well be responsible for the decline in protectionism's cyclic behavior; economists are more united in their disdain for protectionism than virtually any other concept. This in turn leaves one optimistic that the level of protectionism will continue to decline along with its cyclicality.Keywords: empirical, panel, data, policy, trade, barrier, international, tariff, recession, business cycle. JEL Classification Numbers: E32, F13 Contact:Andrew K. Rose, Haas School of Business, University of California, Berkeley, CA 94720-1900 Tel: (510) The BuzzPhysics has quantum mechanics, relativity, and now the Higgs boson. Chemistry has developed the battery, plastics, and radioactivity; modern medicine has given us antibiotics, transplants and vaccination. What has Economics done for humanity lately, if ever? In this paper I argue that perhapsjust perhaps -modern economics is responsible for the decline in protectionism … or at least its (counter-) cyclicality.It is widely accepted that protectionism is counter-cyclic; tariffs, non-tariff barriers and the like are more numerous and/or intense during recessions. Indeed, the entire academic literature, without exception (to the best of my knowledge), agrees that protectionism is counter-cyclic; a review (relegated to the appendix) provides more details.1,2 This paper has a single primary objective: refuting that hypothesis. I wish to establish a new stylized fact; during the post-WW2 era, protectionism has not been counter-cyclic. By way of contrast, there is widespread agreement that protectionism was counter-cyclic before WW1.The secondary goal of this paper is to interpret my new finding; why did the cyclic nature of protectionism change, and what should we make of it? Modern economies differ from those of a century ago in a number of ways. Most counties are now richer, bigger and more open; income and value-added taxes are more important sources of government revenue; many exchange rates now float; the social safety net is larger; production is fragmented across international boundaries; there is more intra-industry trade; and international institutions like the WTO restrict commercial policy. However, in practice none of these things seem to affect the responsiveness of protectionism to the business cycle. That is, the cyclicality of protectionism does not...

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“…OEP adopts 11 Complementing this domestic interest group approach, at least in political science, is a domestic structures model that seeks to characterize and capture institutional variations across developed countries (Katzenstein 1978;Ikenberry et al 1988). 12 In the ferment of the early years of IPE, political scientists built on these works to construct a demandside or societal-based theory of trade policy (McKeown 1984;Cassing et al 1986;Frieden 1988b;Milner 1988). At about this same time, economists developed a parallel "endogenous tariff theory" which also emphasizes the importance of domestic interests and lobbying (Pincus 1975;Lavergne 1983;Baldwin 1985;Magee et al 1989).…”

Section: Open Economy Politicsmentioning

confidence: 99%

Open economy politics: A critical review

Lake

2009

Rev Int Organ

204

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An emergent paradigm, referred to as Open Economy Politics (OEP), now structures and guides research among many scholars. This essay sketches the general contours of the paradigm. Scientific accumulation is, in my view, the potential and great benefit of a self-conscious understanding of OEP as a single, unifying paradigm. The essay also provides a sympathetic critique of OEP and shows how the paradigm can be extended to capture some of the concerns and insights of other critics. Most important, this critique highlights the role and consequences of certain simplifying assumptions commonly used in OEP and calls for a closer examination of how international institutions and policies structure and change the interests of actors within countries that are now taken as exogenous.

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The Political Economy of the Tariff Cycle

Cited by 84 publications

References 22 publications

Trade Policy Uncertainty and the WTO

Trade Policy Uncertainty and the WTO

The march of an economic idea? Protectionism isn't counter-cyclic (anymore)

Open economy politics: A critical review

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