Bairoch revisited: tariff structure and growth in the late 19th century

This paper revisits Bairoch’s hypothesis that in the late 19th century tariffs were positively associated with growth, as recently confirmed by a new generation of quantitative studies (see O`Rourke (2000), Jacks (2006) and Clemens-Williamson (2002, 2004)). This paper highlights the importance of the structure of protection in the relation between trade policy and its potential growth-promoting impact. Evidence is based on a new database on industrial tariffs for the 1870`s. The results show that income, factor endowment, and policy independence are important to explain regional asymmetries between tariffs and growth. At global level, increased protection, measured by total and average tariffs on manufactures, implied more un-skilled inefficient protection and less growth, and this is especially true for the poor countries in the late 19th century. Protection was only positive for a “rich club” if we include in this group New Settler countries which grew rapidly in the late 19th century and imposed high tariffs mainly for fiscal reasons.