IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this article

Factor Endowments, Democracy, and Trade Policy Divergence

Listed author(s):
  • SEBASTIAN GALIANI
  • NORMAN SCHOFIELD
  • GUSTAVO TORRENS

We develop a stochastic model of electoral competition in order to study the economic and political determinants of trade policy. We model a small open economy with two tradable goods, each of which is produced using a sector-specific factor (e.g., land and capital) and another factor that is mobile between these tradable sectors (labor); one nontradable good, which is also produced using a specific factor (skilled labor), and an elected government with the mandate to tax trade flows. The tax revenue is used to provide local public goods that increase the economic agents’ utility. We use this general equilibrium model to explicitly derive the ideal policies of the different socioeconomic groups in society (landlords, industrialists, labor, and skilled workers). We then use those ideal policies to model the individual probabilistic voting behavior of the members of each of these socioeconomic groups. We use this model to shed light on how differences in the comparative advantages of countries explain trade policy divergence between countries as well as trade policy instability within countries. We regard trade policy instability to mean that, in equilibrium, political parties diverge in terms of the political platforms they adopt. We show that in natural resource (land)–abundant economies with very little capital, or in economies that specializes in the production of manufactures, parties tend to converge to the same policy platform, and trade policy is likely to be stable and relatively close to free trade. In contrast, in a natural resource–abundant economy with an important domestic industry that competes with the imports, parties tend to diverge, and trade policy is likely to be more protectionist and unstable.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://hdl.handle.net/10.1111/jpet.12057
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Association for Public Economic Theory in its journal Journal of Public Economic Theory.

Volume (Year): 16 (2014)
Issue (Month): 1 (February)
Pages: 119-156

as
in new window

Handle: RePEc:bla:jpbect:v:16:y:2014:i:1:p:119-156
Contact details of provider: Web page: http://www.blackwellpublishing.com/journal.asp?ref=1097-3923

More information through EDIRC

Order Information: Web: http://www.blackwellpublishing.com/subs.asp?ref=1097-3923

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. Syrquin, Moshe, 1988. "Patterns of structural change," Handbook of Development Economics,in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 7, pages 203-273 Elsevier.
  2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
  3. Torsten Persson & Guido Tabellini, 2006. "Democracy and Development: The Devil in the Details," American Economic Review, American Economic Association, vol. 96(2), pages 319-324, May.
  4. repec:cup:apsrev:v:97:y:2003:i:02:p:245-260_00 is not listed on IDEAS
  5. repec:idb:brikps:33798 is not listed on IDEAS
  6. Mayda, Anna Maria & Rodrik, Dani, 2005. "Why are some people (and countries) more protectionist than others?," European Economic Review, Elsevier, vol. 49(6), pages 1393-1430, August.
  7. Duggan, John & Fey, Mark, 2005. "Electoral competition with policy-motivated candidates," Games and Economic Behavior, Elsevier, vol. 51(2), pages 490-522, May.
  8. Facundo Albornoz & Sebastian Galiani & Daniel Heymann, 2008. "Investment and Expropriation under Oligarchy and Democracy in a Heckscher-Ohlin World," Discussion Papers 08-02, Department of Economics, University of Birmingham.
  9. Jones, Larry E. & Manuelli, Rodolfo E., 1997. "The sources of growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 75-114, January.
  10. Galiani, Sebastian & Heymann, Daniel & Dabús, Carlos & Tohmé, Fernando, 2008. "On the emergence of public education in land-rich economies," Journal of Development Economics, Elsevier, vol. 86(2), pages 434-446, June.
  11. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," Review of Economic Studies, Oxford University Press, vol. 9(1), pages 58-73.
  12. O'Rourke, Kevin Hjortshøj & Taylor, Alan M., 2006. "Democracy and Protectionism," CEPR Discussion Papers 5698, C.E.P.R. Discussion Papers.
  13. Gene M. Grossman & Elhanan Helpman, 1996. "Electoral Competition and Special Interest Politics," Review of Economic Studies, Oxford University Press, vol. 63(2), pages 265-286.
  14. Eduardo Fernández-Arias & Juan S. Blyde & Indermit S. Gill & Alexander Monge Naranjo & Pablo A. Neumeyer & Carlos G. Fernández Valdovinos & Armando Castelar Pinheiro & J. Rodrigo Fuentes & Hugo A. Hop, 2005. "Sources of Growth in Latin America: What Is Missing?," IDB Publications (Books), Inter-American Development Bank, number 33798 edited by Eduardo Fernández-Arias & Juan S. Blyde & Rodolfo E. Manuelli, February.
  15. Norman Schofield & Maria Gallego & Ugur Ozdemir & Alexei Zakharov, 2011. "Competition for popular support: a valence model of elections in Turkey," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 36(3), pages 451-482, April.
  16. Hinich, Melvin J., 1977. "Equilibrium in spatial voting: The median voter result is an artifact," Journal of Economic Theory, Elsevier, vol. 16(2), pages 208-219, December.
  17. repec:cup:apsrev:v:81:y:1987:i:04:p:1121-1137_20 is not listed on IDEAS
  18. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
  19. repec:cup:apsrev:v:57:y:1963:i:02:p:368-377_24 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:bla:jpbect:v:16:y:2014:i:1:p:119-156. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)

or (Christopher F. Baum)

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.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with 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 profile, as there may be some citations waiting for confirmation.

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

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.