Trade, Factor Proportions and Political Rights
AbstractThis paper tests the implication of the Stolper-Samuelson theorem that capital-poor individuals prefer more trade openness in poor (capital-scarce) countries and less trade in rich (labor-scarce) countries, by using a broad panel of countries and new exogenous determinants of trade openness. According to the seminal work in Mayer (1984), capital-poor individuals prefer more trade openness in poor (capital-scarce) countries and less trade openness in rich (labor-scarce) countries. We use the level of political rights as a proxy for the relative capital-labor endowment of the median voter so that an increase in political rights should have asymmetric effects in poor and rich countries: an increase in political rights should lead to more openness in capital poor countries and less openness in capital rich countries. Our results show that, while both income per capita and political rights are positively associated with import intensity, their interaction has a negative and very robust negative association with openness. Increases in political rights lead to sizeable decreases in import intensity after a given income per capita threshold has been surpassed. Our results are robust to the inclusion of structural, geography and cultural determinants of openness, different estimation methods and different proxies for country endowments.
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Bibliographic InfoPaper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp437.
Length: 24 pages
Date of creation: 2003
Date of revision:
Trade Openness; Factor Proportions; Political Rights; Stolper-Samuelson Effects;
Other versions of this item:
- F0 - International Economics - - General
- F02 - International Economics - - General - - - International Economic Order; Noneconomic International Organizations;; Economic Integration and Globalization: General
- F1 - International Economics - - Trade
- F11 - International Economics - - Trade - - - Neoclassical Models of Trade
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
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