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The Political Economy of Free Trade Agreements: an Empirical Investigation

Author

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  • Xuepeng, Liu

    () (Kennesaw State University)

Abstract

This paper studies how income inequality affects the probability of signing free trade agreements (FTAs) in a political economy framework. The median voter approach to FTA formation within a Heckscher-Ohlin framework predicts that an increase in inequality lowers the desirability of an FTA if the partner country is relatively labor abundant, ceteris paribus, and raises the desirability of such an agreement if the partner country is relatively capital abundant. The lobbying model based on the argument of the free rider problem, however, offers the opposite predictions. This paper proposes a duration analysis for bilateral FTA panel data and finds strong support for the predictions from the median voter model.

Suggested Citation

  • Xuepeng, Liu, 2008. "The Political Economy of Free Trade Agreements: an Empirical Investigation," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 237-271.
  • Handle: RePEc:ris:integr:0433
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    Cited by:

    1. repec:ebl:ecbull:eb-17-00837 is not listed on IDEAS
    2. Kangni Kpodar & Patrick Imam, 2016. "Does a Regional Trade Agreement Lessen or Worsen Growth Volatility? An Empirical Investigation," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 949-979, November.

    More about this item

    Keywords

    Free trade agreements; Political economy; Inequality; Median voter model; Lobbying model; Duration analysis;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

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