IDEAS home Printed from https://ideas.repec.org/a/aea/aejapp/v17y2025i3p1-41.html
   My bibliography  Save this article

The Impact of Trade Liberalization in the Presence of Political Distortions

Author

Listed:
  • Sebastian Jävervall
  • Roza Khoban

Abstract

Political distortions are prevalent in many developing countries, implying substantial productivity losses. This paper investigates the impact of trade liberalization on political distortions in India. First, using variation in political turnover, we identify that politicians distort resources in favor of politically connected firms. Second, we show that reduced tariffs on input goods significantly decrease the distortionary effect of political connections, as trade reduces firms' dependence on politicians for sourcing inputs. The results suggest a new margin for gains from trade through reduced politically driven misallocation, implying that trade can address a widespread source of productivity losses.

Suggested Citation

  • Sebastian Jävervall & Roza Khoban, 2025. "The Impact of Trade Liberalization in the Presence of Political Distortions," American Economic Journal: Applied Economics, American Economic Association, vol. 17(3), pages 1-41, July.
    • Handle: RePEc:aea:aejapp:v:17:y:2025:i:3:p:1-41
    DOI: 10.1257/app.20230629
    as

    Download full text from publisher

    File URL: https://www.aeaweb.org/doi/10.1257/app.20230629
    Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.
    File URL: https://doi.org/10.3886/E207301V1
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/materials/23379
    Download Restriction: no
    File URL: https://www.aeaweb.org/articles/materials/23380
    Download Restriction: no
    File URL: https://libkey.io/10.1257/app.20230629?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:aea:aejapp:v:17:y:2025:i:3:p:1-41. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael P. Albert (email available below). General contact details of provider: https://edirc.repec.org/data/aeaaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.