Tariffs, Trade, and Economic Growth in Sweden 1858–1913

Abstract: This thesis investigates the effects of Swedish tariff policy on trade and economic growth during Sweden’s industrial breakthrough in the second half of the nineteenth century. As the Swedish economy developed, its tariff policy also changed from relatively liberal to more protectionist. The move towards protectionism also coincided with accelerating growth rates. This correlation was not a uniquely Swedish phenomenon as a number of researchers investigating European countries in the late nineteenth century have found. This has sparked debate about what effects the tariff policies had on the development of the European economies.Using the Swedish tariff legislation and official statistics from the period, this thesis quantifies the Swedish tariff policy between 1858 and 1913, thus giving a detailed description of the changes to the Swedish tariff structure for the first time. It also investigates the effect of the tariffs on trade, using an import-demand model. In addition to this, it also examines the relationship between import penetration and tariff protection for agriculture and industries in Sweden. Finally, by using effective rates of protection and estimates of labor productivity, the impact of the Swedish tariff policy on structural change and economic growth is analyzed. Contrary to the UK, which kept a low-tariff policy during the period, Sweden adopted a protectionist policy more akin to the German Empire.This study shows that the move towards protectionism in the late 1880s triggered general import substitution. The import structure shifted towards imports of low tariff or duty free commodities, mainly in the form of raw materials and inputs. While the tariff protection was uncorrelated with productivity growth within industries, the tariff structure mainly favored industries with higher levels of labor productivity, inducing factor movements towards more productive sectors. However, this effect on aggregate productivity was positive, but most likely small. This thesis thus highlights the importance of economic structure and variance in labor productivity between sectors for understanding the correlation between tariff protection and growth during the late nineteenth and early twentieth centuries.