DP14775 The Impact of Interwar Protection: Evidence from India

Author(s): Vellore Arthi, Markus Lampe, Ashwin Nair, Kevin Hjortshøj O'Rourke
Publication Date: May 2020
Keyword(s): British Empire, India, interwar period, trade policy
JEL(s): F13, F14, N75
Programme Areas: International Trade and Regional Economics, Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=14775

Research on the quantitative impact of interwar protection on trade flows remains scarce, and much of it has concluded that the impact was surprisingly small. In this paper we ask: Did Indian interwar protection hurt UK manufacturers, by raising tariffs on manufactured imports? Or did it favour UK interests, by discriminating against "foreign" (i.e. non-British) producers? We answer this question by quantifying the impact of trade policy on the value and composition of Indian imports, using novel disaggregated data on both trade policies and imports for 114 commodity categories coming from 42 countries. Indian trade elasticities were generally larger than those in the United Kingdom at the same time. We find that even though Indian protection lowered total imports, it substantially boosted imports from the UK. Trade policy had a big impact on trade flows.