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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. Zvika Neeman & M. Daniele Paserman & Avi Simhon, 2004. "Corruption and Openness," Discussion Paper Series dp353, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  2. Levon Barseghyan & Riccardo DiCecio, 2010. "Cross-country income convergence revisited," Working Papers 2010-021, Federal Reserve Bank of St. Louis.
  3. 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.
  4. Pushan Dutt & Devashish Mitra, 2005. "Political Ideology and Endogenous Trade Policy: An Empirical Investigation," The Review of Economics and Statistics, MIT Press, vol. 87(1), pages 59-72, February.
  5. Roy, Suryadipta, 2007. "Is corruption anti labor?," MPRA Paper 3199, University Library of Munich, Germany.
  6. 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.
  7. 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.
  8. Easterly, William, 2007. "Inequality does cause underdevelopment: Insights from a new instrument," Journal of Development Economics, Elsevier, vol. 84(2), pages 755-776, November.
  9. 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.
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