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Economies of scale and trade policy: The median voter model revisited

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  • Djerdjian, Daron O.
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    Abstract

    Why do some political economy models perform so poorly in predicting actual trade policy? Do scale economies provide the missing puzzle to our understanding of the anti-trade bias? By integrating economies of scale in production, this paper theoretically reinstates the median voter model as in Mayer [Mayer, W. (1984). Endogenous tariff formation. The American Economic Review, 74, 970-985] as a suitable political economy model in predicting trade policy. The modified model generates the scope for the anti-trade bias and predicts that sometimes economic, rather than political, considerations may lead to restrictive trade.

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    Bibliographic Info

    Article provided by Elsevier in its journal International Review of Economics & Finance.

    Volume (Year): 18 (2009)
    Issue (Month): 3 (June)
    Pages: 479-487

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    Handle: RePEc:eee:reveco:v:18:y:2009:i:3:p:479-487

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    Web page: http://www.elsevier.com/locate/inca/620165

    Related research

    Keywords: Trade policy Anti-trade bias Scale economies Welfare Median voter;

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    20. Devarajan, Shantayanan & Rodrik, Dani, 1989. "Trade Liberalization in Developing Countries: Do Imperfect Competition and Scale Economies Matter?," American Economic Review, American Economic Association, vol. 79(2), pages 283-87, May.
    21. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
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    24. Markusen, James R & Wigle, Randall M, 1989. "Nash Equilibrium Tariffs for the United States and Canada: The Roles of Country Size, Scale Economies, and Capital Mobility," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 368-86, April.
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