Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy
AbstractThis paper analyzes the dynamics of trade policy reform under democracy. In an overlapping generations model, heterogeneous agents may acquire skills when young, thereby determining the skill composition of their cohort. Current and anticipated trade policies influence education decisions, and thus the identity of the median voter. We show that there may exist two political steady states: one protectionist and one liberal. Transition from the former to the latter can be achieved by government announcements, temporary educational subsidies, or (exogenous) tariff liberalization by trading partners, but not, in general, by transfer payments to adversely affected workers. We find additionally that reform is politically feasible only if the proposed liberalization is sufficiently large, suggesting that radical reform may be necessary for escaping a ?protectionist rut.? --
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Bibliographic InfoPaper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2007,21.
Date of creation: 2007
Date of revision:
Political Economy; Trade Policy; Skill Acquisition; Politically Stable Policy Paths; Referenda;
Other versions of this item:
- Emily Blanchard & Gerald Willmann, 2007. "Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy," CESifo Working Paper Series 2070, CESifo Group Munich.
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-02 (All new papers)
- NEP-CDM-2007-09-02 (Collective Decision-Making)
- NEP-DGE-2007-09-02 (Dynamic General Equilibrium)
- NEP-INT-2007-09-02 (International Trade)
- NEP-MAC-2007-09-02 (Macroeconomics)
- NEP-POL-2007-09-02 (Positive Political Economics)
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