Could tariffs be pro-cyclical?

James Lake and Maia Linask

Journal of International Economics, 2016, vol. 103, issue C, 124-146

Abstract: Conventional wisdom says that tariffs are counter-cyclical. We analyze the relationship between business cycles and applied MFN tariffs using a disaggregated product-level panel dataset covering 72 countries between 2000 and 2011. Strikingly, and counter to conventional wisdom, we find that tariffs are pro-cyclical. Further investigation reveals that this pro-cyclicality is driven by the tariff setting behavior of developing countries; tariffs are acyclical in developed countries. We present evidence that pro-cyclical market power drives the pro-cyclicality of tariffs in developing countries, providing further evidence of the importance of terms of trade motivations in explaining trade policy.

Keywords: Applied tariff; Business cycle; Terms of trade; Market power (search for similar items in EconPapers)
JEL-codes: E32 F13 F14 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Working Paper: Could tariffs be pro-cyclcial? (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:103:y:2016:i:c:p:124-146

DOI: 10.1016/j.jinteco.2016.09.007

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