Protection and the Business Cycle

Kyle Bagwell and Robert Staiger

No 5168, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Empirical studies have repeatedly documented the countercyclical nature of trade barriers. In this paper, we propose a simple theoretical framework that is consistent with this and other empirical regularities in the relationship between protection and the business cycle. We examine the ability of countries to maintain efficiency- enhancing reciprocal trade agreements that control their temptation to resort to beggar-thy-neighbor policies, under the requirement that such agreements are self-enforcing. We find theoretical support for countercyclical movements in protection levels, as the fast growth in trade volume that is associated with a boom phase facilitates the maintenance of more liberal trade policies that can be sustained during a recession phase in which growth is slow. However, we also find that acyclical increases in the level of trade volume give rise to protection, implying that whether rising imports are met with greater liberalization or increased protection depends on whether they are part of a cyclic upward trend in trade volume or an acyclical increase in import levels.

JEL-codes: F13 (search for similar items in EconPapers)
Date: 1995-07
Note: ITI
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Published as B.E. Journal of Economic Analysis and Policy, Vol. 3, issue 1, article 3

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Related works:
Journal Article: Protection and the Business Cycle (2003)
Working Paper: Protection and Business cycle (1995)
Working Paper: Protection and the Business Cycle (1995)
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