Posted on 02/04/2025 7:49:23 AM PST by karpov
US tariff policy reduced labor productivity in the American manufacturing sector during the late nineteenth and early twentieth centuries, as Alexander Klein and Christopher M. Meissner report in Did Tariffs Make American Manufacturing Great? New Evidence from the Gilded Age (NBER Working Paper 33100).
The researchers find that at the industry level, higher tariffs were associated with reduced labor productivity, greater total output, more establishments, and more workers. They also find that higher tariffs were associated with lower output per establishment, suggesting that higher tariffs led to the entry of smaller, less productive firms.
The effects of tariffs varied significantly across industry subcategories. The negative effects were larger than in the manufacturing sector as a whole in industries such as advanced chemicals like rubber, oil, and dyes, and textiles and apparel. A small set of two dozen industries that were at the vanguard of the “second industrial revolution” exhibit some positive effect of tariffs on labor productivity, but there is still some uncertainty given the large standard errors on these coefficients. Moreover, the importance of these sectors in overall production was small, so the effect of a high tariff regime on overall labor productivity in manufacturing would likely also have been small.
To conduct their analysis, the researchers developed a novel database of product-level tariffs. They digitized tariff information from the Foreign Commerce and Navigation of the United States for various fiscal years between 1869 and 1900. Product names from the data source were standardized, and products were assigned unique Standard International Trade Classification codes to enable analysis at the industry level. Then, they matched the industry-level tariff data to industry-state-level manufacturing information drawn from the US Census of Manufactures for 1870, 1880, 1890, 1900, and 1909.
To avoid confounding cause and effect, the researchers focus on specific tariffs — tariffs specified as a fixed levy per unit of imports. The ratio of the revenue from a specific tariff to the tariff-inclusive price of an imported good, a measure of the tariff rate in percentage terms, varies when the price of the foreign good changes. Foreign price changes can therefore be used as a source of exogenous tariff variation that is not related to potentially endogenous changes in tariff policy, which might be affected by industry conditions and lobbying efforts. These methods reveal some evidence consistent with the idea that industries comprised of politically influential firms were more successful in lobbying for tariff increases.
Economic growth was maintained, but spread more evenly.
If you want the US to turn into a Chinese managed socialist despotism, keep pushing "free trade."
So, uh, if he’s wrong, how is it that entire industries now reside in China and places like the Rust Belt are called that?
As for Mah-Suh-Choosetts, still think Route 128 is a hotbed of innovation and income? Still waiting for Ken Olsen to come back with the next great mainframe? Taiwan already ate that lunch for ya. Without Trump’s efforts as 45, there would be no TSMC plant in Phoenix.
Nope
Starting with a predetermined opinion and cherry picking 100 year old data to validate your opinion while ignoring contrary data is lying by omission.
How about they try looking at the 21st Century data instead?
https://freerepublic.com/focus/f-bloggers/4294888/posts
What Trump’s Tariffs Did Last Time (2018-2019): No Impact on Inflation, Doubled Receipts from Customs Duties, and Hit Stocks
WRONG...
“greater total output, more establishments, and more workers”
That means, more total output, more companies, and better distribution of wealth through the overall economic system.
We socialized our children, and now we're paying the price. Elitists who wanted them stunted so that they could cash in overseas while expecting us to defend them are at root. Now that capital replaces almost all labor, the slippery walls of that economic pit will really bite. There is a way out, but it starts out not looking too pretty.
“higher tariffs were associated with reduced labor productivity, greater total output”
Uh?? So you have reduced productivity, but greater output?
Sounds like tariffs grew the entry of new entities (perhaps smaller business start-ups). Since they are making assumptions I will assume this is a natural growth in capacity created inside the US instead of cheap labor and cheap (quality) products coming into the US to assume that capacity.
I will trust the tariffs utilized will gain us benefits in areas outside of growing economic productivity within the US - we offer so much more to the world than just a place communist dictators can make a fortune. Our failure to address trade properly on a global stage will require some pain for us at home. It is the responsible thing to do.
I’ll pile on:
The USD wasn’t the world’s reserve currency and the US wasn’t the largest economy and market in 1900.
We have the largest market, largest economy and best currency. PPL want in on that market they gotta pay the entry subsidy to partake.
The findings are all standard (and solid). Tariffs shifted production from agriculture to manufacturing. They benefited the north and hurt the south.
On the other hand, we were approximately a single-tax country. We mostly relied on the tariff for revenue. (After tariffs as a source of revenue came our excise tax on alcohol.) We didn’t have an income tax back in those days.
So, the tariff wasn’t prohibitive. It was large enough to generate a lot of revenue, and it did have the effects described in the reference research paper, but only partially as compared to a protective tariff.
Could we reverse it? Could we return to a revenue tariff and reduce our dependence on income and payroll taxes?
No. This was the age of our greatest economic growth, with the second being 1800-1850 if you exclude the post-WW II “golden accident” where the US was the #1 producer AND consumer in the world.
Robert Gordon’s “Rise and Fall of American Growth” argues much differently, that labor productivity not only was good, but is vastly underestimated. Further, the rise of smaller firms is EXACTLY what you want. Japan temporarily took the lead from the US in the 1980s by creating MORE firms, not fewer.
See Robert Gordon, “Rise and Fall of American Growth,” which shows the typical statistical analysis of this period is wrong and vastly understates the real growth.
You are so wrong. Using tariffs to protect American industry from the mercantile British Empire, the former 13 colonies that formed the new America Republic grew from a barely surviving colony on the edge of a wild continent into the greatest industrial power in the world, bar none. Read your history.
Small firms like the Wright Bros.
Smaller companies create a greater flow of money than larger companies.
Tariffs were great when the Federal government was far smaller than it is now and more or less held to the restraints of the Constitution. After FDR, things changed radically. (You could argue that Teddy Roosevelt and Woodrow Wilson were the progenitors of oppressive government, but they mostly set up the framework that the New Deal exploited to vastly expand Federal reach.)
. Read your history.
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history smistory
he has a USAID DOE
grant awarded
“ academic” “ research” paper.
/s
Once read a book called “Dynamic Economics” by Burton Klein. He noted that breakthrough technologies never come from the leader in the field. While he didn’t do this, I went back to the 1800s and noted that
*the auto did not come from the leading non-RR ground transport companies Wells Fargo, Butterfield, Overland, but from a Westinghouse employee named Ford.
*The airplane did not come from balloonists, but from byciclists.
*The computer chips for calculating did not come from the slide rule company Keuffel.
*The personal computer did not come from Xerox, which had 80% of market share.
*The WWW did not come from the PC makers.
*The iPod for music did not come from the leading portable music provider in the world, Sony Walkman
Job's expertise, for example, was in computers with graphical user interfaces, He saw you could make handheld computing devices first for music devices and then easily add telephone capability.
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