LAUSR

Empirical studies pertaining to the effects of openness on income inequality is rather mixed. We consider the impact of the U.S. tariff policy on income inequality in the U.S. over the period 1929–2015. We go beyond the literature and argue that the effects could be asymmetric. When we used data from the U.S. as a whole, like previous studies, we found no significant link between income inequality and the average tariff rate in the U.S. However, when we used data from each state of the U.S., we were able to find short-run asymmetric effects in 22 states and long-run effects in 12. More precisely, we found that an increase in the average U.S. tariff rate will worsen income inequality in Arizona, the District of Columbia, and Idaho, and improve it in West Virginia. On the other hand, we found that cutting tariff rates will improve inequality in the nine states of Alaska, Connecticut, Iowa, Illinois, Indiana, New Hampshire, New Jersey, Pennsylvania, and Utah, and will worsen it only in Idaho.