The endogeneity of tariffs in Italy, 1890-1969

Abstract

The theory of tariff endogeneity suggests that tariffs are influenced by macroeconomic disturbances. The paper tests a simple endogenous tariff model for Italy applying cointegration techniques to time-series data for the period 1890–1969. It is found that the average tariff level is cointegrated with industrial production, consumer prices, the terms of trade and the foreign trade balance (as a percentage of GNP) and that tariff setting has responded to disturbances in these variables. In particular, tariffs appear to have been raised in response to low output growth, increases in the terms of trade and a deteriorating foreign trade balance, and reduced in response to higher inflation.