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Electoral Competiton and Optimal Tariffs

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Author Info
Miaojie Yu (Department of Economics, University of California, Davis)

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Abstract

I show that the unique Nash equilibrium of a model of political competition between two parties in a Heckscher-Ohlin setting entails differentiated trade policies, with a party proposing a high tariff, and the other one a low one. The basic departure from a median voter model is the introduction of campaign contributions, which influence the vote of a group of uninformed voters. Parties are Downsian, not ideological, yet campaign contributions create an asymmetry between them. Thus, the heterogeneous behavior of parties, protectionism and pro-trade, is endogenously decided, rather than a prior assumed in previous works.

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File URL: http://129.3.20.41/eps/it/papers/0509/0509002.pdf
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Publisher Info
Paper provided by EconWPA in its series International Trade with number 0509002.

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Length: 24 pages
Date of creation: 05 Sep 2005
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Handle: RePEc:wpa:wuwpit:0509002

Note: Type of Document - pdf; pages: 24. Please contact the author for the detail mathematical proof if interested.
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Web page: http://129.3.20.41

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Related research
Keywords: tariff political competition median voter

Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
P16 - Economic Systems - - Capitalist Systems - - - Political Economy of Capitalism

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  1. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
    Other versions:
  2. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, vol. 78(4), pages 719-45, September.
  3. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Blackwell Publishing, vol. 63(2), pages 265-86, April. [Downloadable!] (restricted)
    Other versions:
  4. Brock, William A & Magee, Stephen P, 1978. "The Economics of Special Interest Politics: The Case of the Tariff," American Economic Review, American Economic Association, vol. 68(2), pages 246-50, May. [Downloadable!] (restricted)
  5. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December. [Downloadable!] (restricted)
  6. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier. [Downloadable!] (restricted)
  7. Kemp, Murray C. & Khang, Chulsoon, 1975. "A convexity property of the two-by-two model of production," Journal of International Economics, Elsevier, vol. 5(3), pages 255-261, August. [Downloadable!] (restricted)
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