(When) Does Tit-for-tat Diplomacy in Trade Policy Pay Off?
AbstractIn international relations, short-run incentives for non-cooperation often dominate. Yet, (external) institutions for enforcing cooperation are hampered by national sovereignty, supposedly strengthening the role of selfenforcing mechanisms. This paper examines their scope with a focus on contingent protection aka tit-for-tat in trade policy. By highlighting various strategies in a (linear) partial-equilibrium framework, we show that retaliation of non- cooperative behavior by limiting market access works as a disciplining device independently of supply and demand parameters. Our theoretical results are backed by empirical evidence that countries more frequently involved in WTO-mediated disputes entailing tit-for-tat strategies pursue on average more liberal trade regimes.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The World Economy.
Volume (Year): 36 (2013)
Issue (Month): 2 (02)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0378-5920
Other versions of this item:
- Dluhosch, Barbara & Horgos, Daniel, 2012. "(When) Does Tit-for-Tat Diplomay in Trade Policy Pay Off?," Working Paper 116/2012, Helmut Schmidt University, Hamburg.
- Barbara Dluhosch & Daniel Horgos, 2012. "(When) Does Tit-for-Tat Diplomacy in Trade Policy Pay Off?," FIW Working Paper series 085, FIW.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F51 - International Economics - - International Relations, National Security, and International Political Economy - - - International Conflicts; Negotiations; Sanctions
- D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances
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