Trade Barriers and the Collapse of World Trade during the.pdfVIP

SouthernEconomicJournal 2001, 67(4), 848-868 Trade Barriers and the Collapse of World Trade During the Great Depression Jakob B. Madsen* Using panel data estimates of export and import equationsfor 17 countriesin the interwar this estimatesthe effects of tariffandnontariff tradebarriers period, paper increasing on world- wide tradeover the period 1929 to 1932. The estimatessuggestthatrealworldtradecontracted approximately14%because of declining income, 8% as a result of increasesin discretionary tariff rates, 5% owing to deflation-inducedtariff increases, and a further6% because of the imposition of nontariffbarriers. for feedbackeffects from tradebarrierson income Allowing and of tradebarrierscontributed prices, discretionary aboutthe same to the trade impositions collapse as the diminishingnominalincome. 1. Introduction The contraction in world trade during the first phase of the Great Depression stands out as the strongest adverse shock to international trade in modem history. From 1929 to 1932 world import and export volume in the industrialized nations decreased about 30%. However, it is not well understood which factors were responsible for the collapse. The factors that have been highlighted in the literature are declining demand, escalating tariff and nontariff trade barriers, increasing bilateral trade agreements, a