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Heterogeneous Information and Trade Policy

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  • Giacomo Ponzetto

Abstract

Protectionism enjoys surprising popular support, in spite of deadweight losses. At the same time, trade barriers appear to decline with public information about protection. This paper develops an electoral model with heterogeneously informed voters which explains both facts and predicts the pattern of trade policy across industries. In the model, each agent endogenously acquires more information about his sector of employment. As a result, voters support protectionism, because they learn more about the trade barriers that help them as producers than those that hurt them as consumers. In equilibrium, asymmetric information induces a universal protectionist bias. The structure of protection is Pareto inefficient, in contrast to existing models. The model predicts a Dracula effect: trade policy for a sector is less protectionist when there is more public information about it. Using a measure of newspaper coverage across industries, I …find that cross-sector evidence from the United States bears out my theoretical predictions.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 596.

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Date of creation: Dec 2011
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Handle: RePEc:bge:wpaper:596

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Keywords: Protectionism; Voters; Imperfect information; Media coverage; Dracula effect; Pareto inefficiency;

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Citations

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Cited by:
  1. Federico Boffa & Amedeo Piolatto & Giacomo Ponzetto, 2014. "Political Centralization and Government Accountability," Working Papers 656, Barcelona Graduate School of Economics.
  2. Alessandra Bonfiglioli & Gino Gancia, 2012. "Uncertainty, Electoral Incentives and Political Myopia," UFAE and IAE Working Papers, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC) 915.12, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
  3. Boffa, F. & Piolatto, A. & Ponzetto, G.A.M., 2012. "Centralization and Accountability: Theory and Evidence from the Clean Air Act," Discussion Paper, Tilburg University, Center for Economic Research 2012-033, Tilburg University, Center for Economic Research.
  4. Ponzetto, Giacomo AM & Troiano, Ugo, 2014. "Social Capital, Government Expenditures, and Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9891, C.E.P.R. Discussion Papers.
  5. Edward L. Glaeser & Giacomo A. M. Ponzetto, 2012. "Shrouded Costs of Government: The Political Economy of State and Local Public Pensions," NBER Chapters, National Bureau of Economic Research, Inc, in: Retirement Benefits for State and Local Employees: Designing Pension Plans for the Twenty-First Century National Bureau of Economic Research, Inc.
  6. Edward L. Glaeser & Giacomo Ponzetto, 2013. "Shrouded Costs of Government: Political Economy of State and Local Public Pensions Data," Working Papers 660, Barcelona Graduate School of Economics.
  7. Graziano Abrate & Federico Boffa & Fabrizio Erbetta & Davide Vannoni, 2013. "Corruption, Accountability and Efficiency. An Application to Municipal Solid Waste Services," Working papers, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino 022, Department of Economics and Statistics (Dipartimento di Scienze Economico-Sociali e Matematico-Statistiche), University of Torino.

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