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Electoral Competiton and Optimal Tariffs

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  • Miaojie Yu

    (Department of Economics, University of California, Davis)

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://128.118.178.162/eps/it/papers/0509/0509002.pdf
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Bibliographic 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
Date of revision:
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://128.118.178.162

Related research

Keywords: tariff; political competition; median voter;

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References

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  1. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  2. Grossman, Gene M & Helpman, Elhanan, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Wiley Blackwell, vol. 63(2), pages 265-86, April.
  3. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  4. 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.
  5. Robert C. Feenstra & Jagdish N. Bhagwati, 1982. "Tariff Seeking and the Efficient Tariff," NBER Chapters, in: Import Competition and Response, pages 245-262 National Bureau of Economic Research, Inc.
  6. 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.
  7. Magee,Stephen P. & Brock,William A. & Young,Leslie, 1989. "Black Hole Tariffs and Endogenous Policy Theory," Cambridge Books, Cambridge University Press, number 9780521377003, October.
  8. 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.
  9. Wolfgang Mayer & Jun Li, 1994. "Interest Groups, Electoral Competition, And Probabilistic Voting For Trade Policies," Economics and Politics, Wiley Blackwell, vol. 6(1), pages 59-77, 03.
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