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Privatization and the Political Economy of Strategic Trade Policy

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  • Feeney, JoAnne
  • Hillman, Arye L

Abstract

This article considers the interdependence between international financial markets, privatization, and strategic trade policies. We describe an economy where portfolio allocations are chosen by risk-averse agents who rationally forecast future trade policies. Assuming a government responsive to the policy preferences of voters, we show that ownership structure affects trade policy through the incentives for lobbying by private agents. Portfolios and trade policy are thus jointly determined in political-economic equilibrium. Privatization of state-owned industry exerts an important influence over the trade policies chosen by domestic and foreign governments by expanding the scope for individual diversification.

Suggested Citation

  • Feeney, JoAnne & Hillman, Arye L, 2001. "Privatization and the Political Economy of Strategic Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 535-556, May.
  • Handle: RePEc:ier:iecrev:v:42:y:2001:i:2:p:535-56
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    Cited by:

    1. Feeney, JoAnne & Hillman, Arye L., 2004. "Trade liberalization through asset markets," Journal of International Economics, Elsevier, vol. 64(1), pages 151-167, October.
    2. Jones, Ronald W., 2000. "Private interests and government policy in a global world," European Journal of Political Economy, Elsevier, vol. 16(2), pages 243-256, June.
    3. repec:elg:eechap:15325_12 is not listed on IDEAS
    4. Svaleryd, Helena & Vlachos, Jonas, 2002. "Markets for risk and openness to trade: how are they related?," Journal of International Economics, Elsevier, vol. 57(2), pages 369-395, August.
    5. Wilfred J. Ethier & Arye L. Hillman, 2017. "The Politics of International Trade," CESifo Working Paper Series 6456, CESifo Group Munich.
    6. Huck, Steffen & Konrad, Kai A., 2003. "Strategic trade policy and the home bias in firm ownership structure," Japan and the World Economy, Elsevier, vol. 15(3), pages 299-305, August.
    7. Dapeng Cai & Yukio Karasawa-Ohtashiro, 2015. "International cross-ownership of firms and strategic privatization policy," Journal of Economics, Springer, vol. 116(1), pages 39-62, September.
    8. Hillman, Arye L., 2003. "Trade Liberalization and Globalization: A Survey," CEPR Discussion Papers 3845, C.E.P.R. Discussion Papers.
    9. Dewit, Gerda, 2001. "Intervention in risky export markets: insurance, strategic action or aid?," European Journal of Political Economy, Elsevier, vol. 17(3), pages 575-592, September.
    10. Hillman, Arye L., 2003. "Departure from Free Trade: A Survey," CEPR Discussion Papers 3707, C.E.P.R. Discussion Papers.

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