What Do We Really Know About Protection Before the Great Depression: Evidence from Italy

41 Pages Posted: 9 Apr 2015

See all articles by Giovanni Federico

Giovanni Federico

European University Institute

Michelangelo Vasta

University of Siena - Department of Economics and Statistics

Date Written: April 2015

Abstract

The impact of protection on economic growth is one of the traditional issues in economic history, which has enjoyed a revival in recent times, with the publication of a number of comparative quantitative papers. They all share a common weakness: they measure protection with the ratio of custom revenues to imports, which is bound to bias results if imports are not perfectly inelastic. In this paper, we show that the measure of protection matters, by estimating the Trade Restrictiveness Index (TRI) by Anderson and Neary (2005) for Italy from its unification to the Great Depression. We put forward a different interpretation of some key moments of Italian trade policy and we show that the aggregate welfare losses were small in the long run and mostly related to the outlandish protection on sugar in the 1880s and 1890s. We also show that different measures of protection affect considerably the results of econometric tests on the causal relation between trade policy on economic growth in Italy and in the United States. Accordingly, we argue that the economic history of trade policy needs a systematic re-estimating of protection.

Keywords: Italian economic growth, trade policy, Trade Restrictiveness Index

JEL Classification: F13, F14, N73, N74

Suggested Citation

Federico, Giovanni and Vasta, Michelangelo, What Do We Really Know About Protection Before the Great Depression: Evidence from Italy (April 2015). CEPR Discussion Paper No. DP10522, Available at SSRN: https://ssrn.com/abstract=2592344

Giovanni Federico (Contact Author)

European University Institute ( email )

Badia Fiesolana
Via dei Roccettini 9
I-50016 San Domenico Fiesole, Tuscany 50014
Italy

Michelangelo Vasta

University of Siena - Department of Economics and Statistics ( email )

Piazza San Francesco 7
Siena, Siena 53100
Italy

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