Author Archives: jdingel

"The Slide to Protectionism in the Great Depression: Who Succumbed and Why?"

Barry Eichengreen and Doug Irwin look at the drivers of Depression-era protectionism:

The Great Depression was marked by protectionist trade policies and the breakdown of the multilateral trading system. But contrary to the presumption that all countries scrambled to raise trade barriers, there was substantial cross-country variation in the movement to protectionism. Specifically, countries that remained on the gold standard resorted to tariffs, import quotas, and exchange controls to a greater extent than countries that went off gold. Just as the gold standard constraint on monetary policy is critical to understanding macroeconomic developments in this period, national policies toward the exchange rate help explain changes in trade policy. This suggests that trade protection in the 1930s was less an instance of special interest politics run amok than second-best macroeconomic policy management when monetary and fiscal policies were constrained.

Trade costs between cities

Ed Glaeser is pretty blasé about some intranational trade costs in this paragraph:

The national high-speed rail agenda is being pushed with claims that these trains will jump-start economic growth. No serious evidence supports such claims. When new transportation does affect local economies, it generally does so by moving activity from one place to another, not by creating nationwide benefits.

Better intercity transit shifts economic activity with no gains from economic reorganization? That’s not what economists usually expect from falling trade costs. Professor Glaeser is an expert on economic geography and urban economics, so there’s probably some research or theory behind that claim – I wish he wrote link-filled blog posts rather than Boston Globe columns.

Hat tip: Avent.

Trade policy and the crisis: "The fateful allure of protectionism"

The CEPR & World Bank have a new book on trade policy and the crisis edited by Simon Evenett, Bernard Hoekman, and Olivier Cattaneo.

They are mostly warning that countries should guard against protectionism, though we haven’t seen any serious outbreak yet:

Some countries have utilized the ‘policy space’ they have to raise tariffs, but projections – based on past behaviour – are that any such increases are likely to remain limited: In a sector that in the 1970s and 1980s became a bastion of protectionism, textiles and apparel, policy remains very open. Another illustration of the relevance of WTO rules is that countries that are not members are among those that have made the most intensive use of measures to restrict trade and/or investment – e.g., Algeria, Russia.

Whether more positive actions – complete the Doha round, look at climate change initiatives, fund trade policy monitoring efforts, etc – are politically feasible remains to be seen.

Trade policy and the crisis: “The fateful allure of protectionism”

The CEPR & World Bank have a new book on trade policy and the crisis edited by Simon Evenett, Bernard Hoekman, and Olivier Cattaneo.

They are mostly warning that countries should guard against protectionism, though we haven’t seen any serious outbreak yet:

Some countries have utilized the ‘policy space’ they have to raise tariffs, but projections – based on past behaviour – are that any such increases are likely to remain limited: In a sector that in the 1970s and 1980s became a bastion of protectionism, textiles and apparel, policy remains very open. Another illustration of the relevance of WTO rules is that countries that are not members are among those that have made the most intensive use of measures to restrict trade and/or investment – e.g., Algeria, Russia.

Whether more positive actions – complete the Doha round, look at climate change initiatives, fund trade policy monitoring efforts, etc – are politically feasible remains to be seen.

"Does the internet defy the law of gravity?"

Bernardo Blum & Avi Goldfarb, Does the internet defy the law of gravity?, Journal of International Economics, 2006:

We show that gravity holds in the case of digital goods consumed over the Internet that have no trading costs. Therefore trade costs cannot fully account for the effects of distance on trade. In particular, we show that Americans are more likely to visit websites from nearby countries, even controlling for language, income, immigrant stock, etc. Furthermore, we show that this effect only holds for taste-dependent digital products, such as music, games, and pornography. For these, a 1% increase in physical distance reduces website visits by 3.25%. For non-taste-dependent products, such as software, distance has no statistical effect.

“Does the internet defy the law of gravity?”

Bernardo Blum & Avi Goldfarb, Does the internet defy the law of gravity?, Journal of International Economics, 2006:

We show that gravity holds in the case of digital goods consumed over the Internet that have no trading costs. Therefore trade costs cannot fully account for the effects of distance on trade. In particular, we show that Americans are more likely to visit websites from nearby countries, even controlling for language, income, immigrant stock, etc. Furthermore, we show that this effect only holds for taste-dependent digital products, such as music, games, and pornography. For these, a 1% increase in physical distance reduces website visits by 3.25%. For non-taste-dependent products, such as software, distance has no statistical effect.