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Heterogeneous Districts, Interests, and Trade Policy

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Abstract

Congressional districts are political entities with heterogeneous trade policy preferences due to their diverse economic structures. Representation of these interests in Congress is a crucial aspect of trade policymaking that is missing in canonical political economy models of trade. In this paper, we underscore the influence of districts by developing a political economy model of trade with region-specific factors. Using 2002 data from U.S. Congressional Districts, we first characterize the unobserved district-level demand for protection. Extending the model beyond the small country assumption to account for export interests as a force countering protection, we develop a model of national tariff-setting. The model predictions are used to estimate the welfare weights implied by tariff and non-tariff measures enacted nationally. Our supply-side explanation for trade policy, while complementing Grossman and Helpman (1994), reveals district and industry-level patterns of winners and losers, central to understanding the political consequences of trade and the backlash against globalization.

Suggested Citation

  • Kishore Gawande & Pablo Pinto & Santiago Pinto, 2023. "Heterogeneous Districts, Interests, and Trade Policy," Working Paper 23-12, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:97295
    DOI: 10.21144/wp23-12
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    References listed on IDEAS

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    3. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-160, February.
    4. Douglas A. Irwin, 2017. "Introduction to "Clashing over Commerce: A History of US Trade Policy"," NBER Chapters, in: Clashing over Commerce: A History of US Trade Policy, pages 1-27, National Bureau of Economic Research, Inc.
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    7. Irwin, Douglas A & Kroszner, Randall S, 1999. "Interests, Institutions, and Ideology in Securing Policy Change: The Republican Conversion to Trade Liberalization after Smoot-Hawley," Journal of Law and Economics, University of Chicago Press, vol. 42(2), pages 643-673, October.
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    More about this item

    Keywords

    Trade Policy; Political Economy; Districts; Tariffs; NTMs; Legislature;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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