Did Tariffs Make American Manufacturing Great? New Evidence from the Gilded Age | Hoover Institution

Wednesday, January 15, 2025
Hoover Institution, Stanford University

Christopher Meissner, professor of economics at the University of California, Davis, discussed “Did Tariffs Make American Manufacturing Great? New Evidence from the Gilded Age,” a paper co-authored with Alexander Klein from the University of Sussex.

PARTICIPANTS

Christopher Meissner, John Taylor, John Cochrane, Robert Barro, Hoyt Bleakley, Valentin Bolotnyy, Michael Boskin, Jennifer Burns, Steve Davis, Christopher Erceg, David Fedor, Eric Hanushek, Bob Hall, Ken Judd, Morris Kleiner, Evan Koenig, David Laidler, Mickey Levy, Jacob Light, John Lipsky, Axel Merk, Roger Mertz, Ilian Mihov, Brendan Moore, Elisabeth Paté-Cornell, Paul Peterson, Charles Plosser, Alvin Rabushka, Valerie Ramey, Stephen Redding, Pierre Siklos, Richard Sousa, Jack Tatom, George Tavlas, Ramin Toloui, Harald Uhlig, Wei Wei, Marc Weidenmeier, Gavin Wright, Alexanter Zentefis

ISSUES DISCUSSED

Christopher Meissner, professor of economics at the University of California, Davis, discussed “Did Tariffs Make American Manufacturing Great? New Evidence from the Gilded Age,” a paper co-authored with Alexander Klein from the University of Sussex.

John Taylor, the Mary and Robert Raymond Professor of Economics at Stanford University and the George P. Shultz Senior Fellow in Economics at the Hoover Institution, was the moderator.

PAPER SUMMARY

We study the relationship between tariffs and labor productivity in US manufacturing between 1870 and 1909. Using highly disaggregated tariff data, state-industry data for the manufacturing sector, and an instrumental variable strategy, results show that tariffs reduced labor productivity. Tariffs also generally reduced the average size of establishments within an industry but raised output prices, value-added, gross output, employment, and the number of establishments. We also find evidence of heterogeneity in the association between tariffs and value added, gross output, employment, and establishments across groups of industries. We conclude that tariffs may have reduced labor productivity in manufacturing by weakening import competition and by inducing entry of smaller, less productive domestic firms. Our research also reveals that lobbying by powerful and productive industries may have been at play. The era’s high tariffs are unlikely to have helped the US become a globally competitive manufacturer.