Trade and US Inequality in the Tokyo Round

Andrew Greenland, James Lake and John Lopresti

No 34785, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Against a backdrop of sharply rising inequality, the Tokyo Round of the GATT resulted in a 1.6 percentage point reduction in average US tariffs – larger than CUSFTA, NAFTA, and the liberalization accompanying the granting of PNTR to China. We construct a novel IV based on the so-called “Swiss formula” that governed the Tokyo Round tariff liberalization to provide evidence of its effects on imports and inequality. Instrumented tariff reductions explain approximately 20% of the rise in income inequality between non-production and production workers between 1979 and 1988. This effect is largest among women, workers in routine occupations, and workers in more technology-intensive industries, suggesting a complementarity between trade liberalization and skill-biased technological change.

JEL-codes: F13 F14 F66 (search for similar items in EconPapers)
Date: 2026-01
Note: EFG
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