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The agricultural sector can be protected either by tariffs or subsidies. Most developed countries have moved away from tariffs to subsidies, which are supposed to be more economically efficient, but Japan remains extensively reliant on tariffs for agricultural protection. As such, there is a large gap between what is prescribed by the orthodox trade theory, which suggests a combination of tariff elimination and compensation through lump-sum subsidies as the best policy mix for economic welfare, and what is actually pursued by Japan. Despite such a gap, existing literature on the political-economy of agricultural protection has mainly focused on the ‘level' of protection and rarely addresses the ‘choice' of instruments either tariffs or subsidies. Against this background, this article explores the determinants of tariff dependence in agricultural protection through a regression analysis using panel data for 10 OECD countries to identify the reasons why Japan continues to reply on tariffs as a means of agricultural protection. Hypotheses explaining the preference for tariffs over subsidies to be verified are threefold: (i) ‘revenue motive hypothesis' emphasising the budgetary constraints by governments or lower collection costs of tariffs, (ii) ‘incomplete information hypothesis' arguing that taxpayers understate social costs of tariffs and overstate those of subsidies, (iii) ‘collective action hypothesis' focusing on the collective good nature of tariffs that lead to free-riding among interests groups, lower lobby competition and smaller welfare losses. Their validity is verified based on the statistical significance of coefficients in a single equation estimated by the OLS, with the dependent variable being tariff-dependency ratio (share of tariff protection in total agricultural protection). Independent variables include (i) government debt ratio and income tax dependency ratio as proxies for revenue motive hypothesis, (ii) tertiary attainment ratio and newspaper subscription ratio as proxies for incomplete information hypothesis, (iii) voter turnout in parliamentary elections and concentration ratio of dominant agricultural commodities as proxies for collective action hypothesis, and (iv) trade dependency ratio and exchange rates against US dollar as control variables. The regression analysis reveals that the revenue motive and incomplete information hypotheses are validated given that the coefficients of government debt ratio and tertiary attainment ratio are statistically significant with the expected signs. However, the collective action hypothesis is not supported. Trade dependency ratio as a control variable is also statistically significant with the expected sign. A growth accounting analysis of individual countries based on these statistically significant explanatory variables shows that Japan's consistently high tariff dependence is largely explained by increased government debt ratio. This result implies that Japan's salient increase in budget deficit makes it difficult to transform its agricultural protection from consumer-borne tariffs to taxpayer-financed subsidies due to budgetary constraints. Consequently, it will be indispensable to secure stable revenue sources to be devoted to compensatory subsidies for producers without relying on tariff revenues if Japan is to move away from tariff to subsidy protection.JEL Classification: F13, H29, Q17, Q18

Determinants of Tariff Dependence in Agricultural Protection in Developed Countries: An Empirical Analysis using Panel Data