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PRELIMINARY AND INCOMPLETE DRAFT

By Douglas A. Irwin

Abstract

A classic economic question concerns the incidence of import duties and the extent to which domestic consumers or foreign exporters bear the burden of the tariff, yet direct empirical evidence on this question is scarce. This paper studies the impact of two large tariff shocks- the Smoot-Hawley increase in 1930 and the Underwood-Simmons reduction in 1913 – on monthly product-level import prices. In the case of Smoot-Hawley, in 21 of 26 goods considered, import prices did not fall significantly when the higher duties were imposed, suggesting that domestic consumers paid the tariff in most cases. In the case of the Underwood-Simmons tariff reduction, import prices did not rise significantly in 13 of 15 cases. This does not necessarily mean that the United States was a “small country ” in world trade, but that relatively large changes in U.S. tariffs might not shift the pattern of world consumption enough to affect world prices. Acknowledgements: I wish to thank Benjamin Gettinger for excellent research assistance, James Poterba for helpful discussions, and Robert Feenstra, the Dartmouth International Lunch group, and attendees at the NBER’s ITI Program Meeting (Spring 2010) for very useful comments. 2 1

Year: 2010
OAI identifier: oai:CiteSeerX.psu:10.1.1.184.520
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