The Political Economy of Trade Policy in Tunisia

This paper explores the political economy determinants of cross-industry distribution of protection in Tunisia. Instead of the contribution motive, we assume that the government was seeking legitimacy and, to that end, chose import substitution as an industrial strategy to promote industries with learning potential but still with a likely concern for tariff proceeds as well as for rent generation. Following Esfahani (2005), we include in the latter motive the need for the government to alleviate risk for groups that have imperfect access to credit and/or insurance markets. The estimation of a simple model for a cross-section of 35 Tunisian manufacturing industries in 1997 shows that the industrial distribution of nominal protection tended to obey the special-interests pressures emanating from big, capitalistic firms, supplying consumer goods in the import substitution sectors. However, the workers’ interests and the government ad hoc growth objectives seem to matter as well.