Beyond Brigden: Australia’s pre-war manufacturing tariffs, real wages and economic size

Abstract

Like many industrialised economies in the pre-depression era, Australia elected to maintain a highly protectionist trade policy regime and hence to retard its integration with the global economy. The rationale for Australia’s protectionism was, as elsewhere, the enhancement of worker welfare. The Brigden Report offered a pre-Stolper-Samuelson recognition that protection of labour intensive industries would bolster Australia’s real wage, though the Report did not highlight the further consequence that this would attract European migrants. Brigden’s wage effect mirrors the subsequent Stolper-Samuelson Theorem and Heckscher-Ohlin-Samuelson (HOS) model yet it has still more advanced elements. We illustrate it using the strict two-sector HOS model and a more modern version with differentiated products, three sectors, including a non-traded services sector, natural resources as a specific factor and foreign ownership of domestic capital. While ever production remains diversified, the HOS model with elastic migration does not support a unique link between a single region’s protection and its labour endowment. The more modern model does yield this link, however, suggesting that protection might indeed have fostered, at least temporarily, immigration, capital inflow and overall economic expansion in Australia. Show more