Toward a business-cycle model of tariffs

Abstract

A modified interest-group model links movements in tariffs to changes in the level of economic activity within nations. This model is introduced and tested for tariff behavior in the 19th and early 20th centuries in three nations: the United States, Great Britain, and Germany. Empirical analysis lends strong support to the model's central thesis, that tariffs are sensitive to movements within a business cycle. Tariff changes occurring in the three nations, with the exception of British tariff increases, generally conform to the expectations of the model. Furthermore, business-cycle sensitivity provides an explanation of the behavior of tariffs superior to two prominent alternatives, those based on ideology and on hegemonic stability.