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Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation

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  • Xenia Matschke
  • Shane M. Sherlund

Abstract

Some recent empirical studies, motivated by Grossman and Helpman's (1994) "protection-for-sale" model, suggest that very few factors (none of them labor related) determine trade protection. This paper reexamines the roles that labor issues play in the determination of trade policy. We introduce collective bargaining, differences in inter industry labor mobility, and trade union lobbying into the protection-for-sale model, and show that the equilibrium protection rate in our model depends upon these labor market variables. We test our model predictions using data from U.S. manufacturing and find that labor market considerations do seem to matter for U.S. trade policy.

Suggested Citation

  • Xenia Matschke & Shane M. Sherlund, 2006. "Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation," American Economic Review, American Economic Association, vol. 96(1), pages 405-421, March.
  • Handle: RePEc:aea:aecrev:v:96:y:2006:i:1:p:405-421
    Note: DOI: 10.1257/000282806776157524
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    References listed on IDEAS

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    1. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
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    3. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    4. Matschke, Xenia N., 2004. "Labor Market Rigidities And The Political Economy Of Trade Protection," Santa Cruz Department of Economics, Working Paper Series qt2274x2pn, Department of Economics, UC Santa Cruz.
    5. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
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    8. 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.
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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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