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Comparative Economic Studies

, Volume 59, Issue 3, pp 345–381 | Cite as

Tariff-Induced (De)industrialization: An Empirical Analysis

  • Marjan Petreski
  • Branimir Jovanovic
  • Igor Velickovski
Original Article
  • 28 Downloads

Abstract

In this paper, we investigate if tariffs affected manufacturing value added in 25 countries from Central and Southeast Europe, the Commonwealth of Independent States, and the Middle East and North Africa over the period 1990–2010. We identify and test three channels through which tariffs may affect industry value added. We use various fixed effects and an instrumental variable approach to address tariffs’ endogeneity with respect to value added. The results suggest that, in general, lower tariffs seem to lead to higher value added, mainly through the higher imports of inputs in the production process, which were either non-existent or more expensive on the domestic market previously. However, there are notable differences in the effects between different groups of countries and industries: tariffs are not found to affect industrialization in Southeast Europe and the Middle East and North Africa, which implies that their decision to liberalize trade was likely premature. This is supported by the finding that lower tariffs have positive effects on industry value added only in more mature industries.

Keywords

industrialization trade liberalization tariffs 

JEL Classification

F13 F42 

Notes

Acknowledgements

This research has been supported by a grant awarded by the Vienna Institute for International Economic Studies (WIIW) and the Global Development Network (GDN). The authors would like to thank Amat Adarov, Mahdi Ghodsi, Vladimir Gligorov, Mario Holzner and Michael Landesmann, as well two anonymous referees, for helpful comments on earlier version of the paper. All remaining errors are of the authors solely.

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Copyright information

© Association for Comparative Economic Studies 2017

Authors and Affiliations

  • Marjan Petreski
    • 1
  • Branimir Jovanovic
    • 2
  • Igor Velickovski
    • 3
  1. 1.University American College SkopjeSkopjeMacedonia
  2. 2.University of TurinTurinItaly
  3. 3.National Bank of the Republic of MacedoniaSkopjeMacedonia

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