The Political Economy of Tariffs

What determines a tariff? And are they falling or rising, on average? Tariffs do seem to be falling, with most significant tariffs existing on agriculture. This video discusses the concept of concentrated vs. diffused costs when it comes to tariffs and subsidies, based on findings from economist Mancur Olson. The video also looks at the intersection of foreign policy and trade, using trade as a way to help developing countries liberalize and move toward democracy. You'll also learn about Professors Gene M. Grossman and Elhanan Helpman's paper on trade protection titled "Protection for Sale." Politics is modeled as an auction process through which interest groups bid for tariffs. To that end, predictors of tariffs include whether an industry is politically organized, whether there is import elasticity of a good with respect to tariffs, and whether a good has a low or high import-penetration ratio.