A Political-Economic Account of Global Tariffs

Kishore Gawande, Pravin Krishna and Marcelo Olarreaga

Economics and Politics, 2015, vol. 27, issue 2, 204-233

Abstract: type="main" xml:id="ecpo12056-abs-0001">

The objective of this paper is to evaluate the relative importance of three distinct factors that motivate redistributive government policy: tariff revenues, consumer welfare, and producer profits. We generalize Grossman and Helpman's (1994, American Economic Review 84: 833–850). protection-for-sale model by positing that government places different weights on these components of the welfare of its polity when it decides which industries to protect and to what extent. Employing tariff data from 40 countries, the predictions from this model are used to estimate these weights. The results are surprising in their range and variety. Developing countries with weak tax systems often weigh tariff revenue heavily, while more developed countries weigh producer interests the most. Very few hold consumer welfare dear.

Date: 2015
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