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Reconciling Observed Tariffs and the Median Voter Model

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  • Swati Dhingra

Abstract

type="main" xml:id="ecpo12045-abs-0001"> Median voter theory applied to trade policy predicts positive tariffs in capital-abundant countries and negative tariffs in labor-abundant countries. Negative tariffs are rare, and this paper reconciles the median voter theory with observed protectionism across countries. By considering large countries, I show the optimal tariff is a sum of the median voter component and a positive term of trade component. Positive terms of trade effects raise tariffs in all countries, and can overcome the negative median voter component in labor-abundant countries. Testing the tariff prediction with cross-section and panel data from the 1990s, I show the median voter component is negative in labor-abundant countries and positive in capital-abundant countries. As expected, terms of trade effects raise tariffs across all countries and are stronger among nonmembers of the WTO.

Suggested Citation

  • Swati Dhingra, 2014. "Reconciling Observed Tariffs and the Median Voter Model," Economics and Politics, Wiley Blackwell, vol. 26(3), pages 483-504, November.
    • Handle: RePEc:bla:ecopol:v:26:y:2014:i:3:p:483-504
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    File URL: http://hdl.handle.net/10.1111/ecpo.2014.26.issue-3
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    Cited by:

    1. Egger, Hartmut & Fischer, Christian, 2020. "Increasing resistance to globalization: The role of trade in tasks," European Economic Review, Elsevier, vol. 126(C).
    2. Blanchard, Emily & Willmann, Gerald, 2022. "Unequal gains, prolonged pain: A model of protectionist overshooting and escalation," Journal of International Economics, Elsevier, vol. 135(C).
    3. Sheldon, Ian M. & Chow, Daniel C.K. & McGuire, William, "undated". "Trade Liberalization and Institutional Constraints on Moves to Protectionism: Multilateralism vs. Regionalism," 2018 Allied Social Sciences Association (ASSA) Annual Meeting, January 5-7, 2018, Philadelphia, Pennsylvania 266305, Agricultural and Applied Economics Association.
    4. Kyle Bagwell & Robert W. Staiger, 2016. "The Design of Trade Agreements," NBER Working Papers 22087, National Bureau of Economic Research, Inc.
    5. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F59 - International Economics - - International Relations, National Security, and International Political Economy - - - Other

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