The endogeneity of tariffs in Italy, 1890-1969

The theory of tariff endogeneity suggests that tariffs are influenced by ma croeconomic disturbances. The paper rests a simple endogenous tariff model for Italy applying cointegration techniques to time-series data for the per iod 1890-1969. It is found that the average tariff level is cointegrated wi th industrial production, consumer prices, the terms of trade and the forei gn trade balance (as a percentage of GNP) and that tariff setting has respo nded to disturbances in these variables. In particular, tariffs appear to h ave been raised in response to low output growth, increases in the terms of trade and a deteriorating foreign trade balance, and reduced in response t o higher inflation.