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Political economy determinants of non-agricultural trade policy

  • Subhayu Bandyopadhyay
  • Suryadipta Roy

The authors investigate several existing political economy hypotheses on trade policy using cross-country trade-protection data for non-agricultural goods. The authors find that a left-leaning political regime leads to pro-labor trade policies only for a subset of trade policy measures. In addition, they find that income inequality and country-level corruption appear to be important determinants of trade policy. For various measures of trade protection, it appears that corruption tends to hurt labor interests by increasing trade protection in labor-abundant countries and reducing trade protection in capital-abundant countries. This finding suggests that corruption, among other factors, may move trade policy away from the desires of the median voter.

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Article provided by Federal Reserve Bank of St. Louis in its journal Review.

Volume (Year): (2011)
Issue (Month): Mar ()
Pages: 89-104

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Handle: RePEc:fip:fedlrv:y:2011:i:mar:p:89-104:n:v.93no.2
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  1. Barseghyan, Levon & DiCecio, Riccardo, 2011. "Cross-country income convergence revisited," Economics Letters, Elsevier, vol. 113(3), pages 244-247.
  2. Neeman Zvika & Paserman M. Daniele & Simhon Avi, 2008. "Corruption and Openness," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 8(1), pages 1-40, December.
  3. Suryadipta Roy, 2010. "Is corruption anti-labour?," Applied Economics Letters, Taylor & Francis Journals, vol. 17(4), pages 329-333.
  4. Easterly, William, 2007. "Inequality does cause underdevelopment: Insights from a new instrument," Journal of Development Economics, Elsevier, vol. 84(2), pages 755-776, November.
  5. Pushan Dutt & Devashish Mitra, 2002. "Political Ideology and Endogenous Trade Policy: An Empirical Investigation," NBER Working Papers 9239, National Bureau of Economic Research, Inc.
  6. Dutt, Pushan & Mitra, Devashish, 2006. "Labor versus capital in trade-policy: The role of ideology and inequality," Journal of International Economics, Elsevier, vol. 69(2), pages 310-320, July.
  7. Michael P. Murray, 2006. "Avoiding Invalid Instruments and Coping with Weak Instruments," Journal of Economic Perspectives, American Economic Association, vol. 20(4), pages 111-132, Fall.
  8. Milner, Helen V. & Kubota, Keiko, 2005. "Why the Move to Free Trade? Democracy and Trade Policy in the Developing Countries," International Organization, Cambridge University Press, vol. 59(01), pages 107-143, January.
  9. Dutt, Pushan & Mitra, Devashish, 2002. "Endogenous trade policy through majority voting: an empirical investigation," Journal of International Economics, Elsevier, vol. 58(1), pages 107-133, October.
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