Trade Policy and the American Income Distribution

P REVIOUS studies of the effects of U.S. tariffs and quotas on U.S. real income and its distribution have concluded that these effects are minimal. Moreover, this conclusion has emerged from both partial equilibrium' and general equilibrium2 approaches. However, most of these studies assumed labor to be the only variable factor. This study combines a general equilibrium methodology with a significant degree of disaggregation by using the 83 sector United States input-output table and a linear programming approach3 to assess the impact of the 1967 structure of U.S. tariffs and quotas on the American functional income distribution. We conclude that when all factors are perfectly mobile, the effects on aggregate real income and its distribution are much greater than previously found, and these effects are highly sensitive to the degree of mobility assumed. Section II presents the critical assumptions of the model, and contrasts them with those of the other models. Section III contains a discussion of the data, and section IV draws our conclusions. II. The Model4