Conferences at Department of Economics, University of Toronto, RCEF 2012: Cities, Open Economies, and Public Policy

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Production, Prices, Protection, and Productivity: Canadian Cotton Textiles in the 19th Century

Tom Barbiero, Michael Hinton

Last modified: 2012-08-15

Abstract


With output growing at 16 to 18 percent a year 1870 to 1890, the Canadian cotton textile industry was the second fastest growing cotton industry in the world in the late-nineteenth century.  Only the Japanese industry grew faster, growing at 19 percent. The Italian cotton industry growing at 10 percent a year and running third in this international growth race came nowhere close to the Canadian and Japanese world leaders. Economic historians, economists may be surprised to hear, have little good to say about the pre-WWI Canadian cotton textile industry. Why? Because most of its growth, they claim, was leveraged by the much discussed and debated National Policy tariff of 1879.  We argue that historians have grossly exaggerated the importance of the NP as a causal factor in the growth of the cotton industry: (1) because there was no significant increase in the industry’s long-term growth in or around the introduction of the NP; (2) because the revenue tariffs of the 1870s were far more protective than is generally realized; and (3) because a large number of other market and non-market causal factors were at work in addition to the tariff, which in counterfactual general equilibrium and partial equilibrium exercises are shown to account for the lion’s share of the industry’s growth. (JEL F11, F13, F14, N61, N71)


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