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4080 Ann Harrison and Andrés Rodríguez-Clare

four columns indicate the ratio of tariff revenues to trade flows, taken from the World
Bank. The next four columns report the actual statutory tariffs, averaged across import
categories between 1980 and 2004. The next two columns report changes in these
tariffs between 1985 and 2004. The last column indicates the change in the standard
deviation of statutory tariffs over time; this measure is an indication of the change in
the dispersion of tariffs.
It is evident from Table 2 that there has been a dramatic decline in tariff protection
among developing countries. Statutory tariffs in India declined from 98.8% in 1985 to
28.1% in 2004; in Bangladesh from 86% in 1985 to 16.4%; in Costa Rica from 53% to
5.7%; in China from 49.5% in 1980 to 9.8% in 2004; in Turkey from 44% to 2.6%, and
in Chile from 30% to 4.9%. Not all countries had such enormous declines, however: in
Algeria, average tariffs only declined slightly, from 21% to 18%.
There are several other features worth noting in Table 2. The last column of Table 2
shows that there has been a dramatic decline in tariff dispersion, as indicated by the fall in
the standard deviation of tariffs. There is also a large discrepancy between tariff revenues
as a percentage of trade flows (“revenue tariffs”) and actual statutory tariffs. To illustrate
the difference, Table 2 shows that average statutory tariffs in India in 1985 were 98.8%
but tariff collections as a percentage of trade were only 24.4%. In Paraguay, average tariffs
were 71% in 1980, while tariff collections were 6%; in Costa Rica, tariffs were 55% and
collections were 5.3%; in Chile, average tariffs in 1985 were 30% but tariff collections
were 5.7%. The difference between these two measures reflects in part the role of tariff
exemptions-typically state enterprises were exempt from paying tariffs, as were many
exporters and foreign enterprises—as well as selective imposition of duties by customs
officers and the negative impact of high tariffs on imports.
We also highlight the historically high levels of protection in China. China has
arguably had the most spectacular success in integrating into the world economy in
the last two decades. Yet in 1990, it was still one of the most protected economies
in the world, with an average tariff rate of 40%. According to Table 2, in 1990 China
was tied for fifth place in average levels of tariff protection, behind Bangladesh, India,
Pakistan, and Kenya. The dispersion of tariff levels was also high, and the maximum
tariff exceeded 200%. Figure 3, taken from Rodrik (2006) documents that much
of China’s export surge occurred simultaneously with the imposition of high tariffs.
Nevertheless, countries such as China and India—because they had such high tariffs
to begin with—also exhibited the highest tariff reductions between 1985 and 2004.

4.2 Cross-country evidence on trade policies, trade volumes,


productivity, and growth
A standard approach in the cross-country literature is to regress an outcome of interest
for country i at time t (GDP growth, real GDP per worker, or total factor productivity
(TFP) growth) on a preferred measure of openness and a set of controls Z,