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A Theory of Trade Policy Under Dictatorship and Democratization

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  • Ben Zissimos

    (Department of Economics, University of Exeter)

Abstract

This paper develops a new model of trade policy under dictatorship and democratization. The paper makes two contributions. One is to provide a deeper understanding of the relationship between political institutions and economic performance by studying the endogenous interaction between the form of government and trade policy. If a ruling elite own a factor that is scarce then democratization goes hand in hand with trade liberalization and an increase in economic efficiency, as argued by classical scholars. But if the elite own an abundant factor then democratization is accompanied by an increase in protectionism and a reduction in e¢ ciency. The paper also characterizes the circumstances under which a dictatorship can use trade policy to forestall democratization. The paper?s second contribution is to show how trade policy can be manipulated to maintain the status quo in the face of world price shocks, thus opening the door to a re-examination of trade policy responses to technology shocks. The model is used to explain an interesting episode of trade policymaking between 1815 and 1846, during which time Britain substantially liberalized trade while Prussia, on the other side of the grain market, signi?cantly increased protectionism. It is also used to shed light on the wide-spread imposition of export restrictions in response to the 2007-08 food crisis.

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File URL: http://people.exeter.ac.uk/cc371/RePEc/dpapers/DP1403.pdf
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Bibliographic Info

Paper provided by Exeter University, Department of Economics in its series Discussion Papers with number 1403.

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Date of creation: 2014
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Handle: RePEc:exe:wpaper:1403

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Keywords: Efficiency; institutions; protectionism; social con?ict; trade policy.;

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  1. Chipman, John S, 1969. "Factor Price Equalization and the Stolper-Samuelson Theorem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(3), pages 399-406, October.
  2. Kindleberger, C. P., 1975. "The Rise of Free Trade in Western Europe, 1820–1875," The Journal of Economic History, Cambridge University Press, vol. 35(01), pages 20-55, March.
  3. Cheryl Schonhardt-Bailey, 2006. "From the Corn Laws to Free Trade: Interests, Ideas, and Institutions in Historical Perspective," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195437, December.
  4. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
  5. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
  6. Acemoglu, Daron & Robinson, James A, 1998. "Why did the West Extend the Franchise? Democracy, Inequality and Growth in Historical Perspective," CEPR Discussion Papers 1797, C.E.P.R. Discussion Papers.
  7. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
  8. Galiani, Sebastian & Torrens, Gustavo, 2014. "Autocracy, democracy and trade policy," Journal of International Economics, Elsevier, vol. 93(1), pages 173-193.
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