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The Contractionary Effects of Protectionist Trade Policy in a Dollarized Economy

Author

Listed:
  • Grijalva, Diego F.
  • Uribe-Terán, Carlos
  • Gachet, Iván
Abstract
This study analyzes the firm-level impacts of temporary safeguard import tariffs implemented in Ecuador from 2015 to 2017. Employing a difference-in-differences methodology, we explore the policy's effects on a unique dataset combining firm- and product-level data. We focus on the direct effects on importing firms and indirect effects through the value chain. The analysis shows that, while the safeguards significantly reduced imports, they also resulted in short-run negative scale effects on firms. These include reduced sales, employment, labor costs, and material costs, without positive impacts on local firms in import-competing industries. Overall, our findings suggest a contractionary effect of protectionist policies, particularly in a dollarized economy highlighting the complex implications of trade measures on firm performance and economic sectors.

Suggested Citation

  • Grijalva, Diego F. & Uribe-Terán, Carlos & Gachet, Iván, 2024. "The Contractionary Effects of Protectionist Trade Policy in a Dollarized Economy," IDB Publications (Working Papers) 13358, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:13358
    DOI: http://dx.doi.org/10.18235/0005501
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    References listed on IDEAS

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    More about this item

    Keywords

    trade policy; Protectionism; Input-output linkages; emerging markets; Latin America;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean

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