The welfare effects of protection: FB3-5/2017-18E-PDF

a general equilibrium analysis of Canada’s national policy /

“In this paper, we study the impact of Canada’s adoption of protectionist trade policy in 1879 on Canadian welfare. Under the National Policy the Canadian average weighted tariff increased from 14% to 21%. The conventional view is that this was a distortionary policy that negatively affected Canadian welfare. We argue that this view is incomplete because it ignores general equilibrium effects. Using a multi-industry general equilibrium model with differentiated goods, we show that the welfare effects of tariffs can potentially be positive, even for small open economies, due to their impact on the terms of trade. We apply these theoretical insights in a reassessment of the welfare consequences of the National Policy for Canada using newly compiled granular trade and production data from 1870 to 1913, and newly estimated historically contemporaneous import demand elasticities. Our results suggest that the National Policy’s tariff changes actually improved Canadian welfare by between 0.13% to 0.20% of gross domestic product, although a multilateral move to free trade would have resulted in an even better welfare outcome for Canadians"--Abstract, p. ii.

Permanent link to this Catalogue Record: What is a permanent link?
http://publications.gc.ca/pub?id=9.837135&sl=0
MARC XML Format   MARC HTML Format

Department/Agency Bank of Canada.
Title The welfare effects of protection
Subtitle a general equilibrium analysis of Canada’s national policy /
Series Title Bank of Canada staff working paper,
Publication Type Series - View Master Record
Language [English]
Format Electronic
Electronic Document

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please contact the authoring department to request a format other than those available.

We invite you to consult the Frequently Asked Questions page for additional information regarding the Archived Content notice.


Having trouble opening this document?

Note: The URLs contained in this/these document(s) may no longer be functional
Note "May 2017."
Date 2017.
Number of Pages iii, 25 p.
Catalogue Number
  • FB3-5/2017-18E-PDF
Subject Terms Tariffs, Trade policy, Modelling