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Trade and the Political Economy of Redistribution

Author

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  • Gonzague Vannoorenberghe
  • Eckhard Janeba

Abstract

This paper analyzes the effects of trade liberalisation on the political support for policies that redistribute income between workers in different sectors. We allow for worker heterogeneity and imperfect mobility of workers across sectors, giving rise to a trade-off between redistribution and the inefficiency of the labor allocation. We compare two environments, autarky and small open economy, and present three main findings. First, redistributive policies are more “likely” to arise in a small open than in a closed economy. Second, if a redistributive policy is adopted in both situations, its nominal level is higher in autarky than in the small open economy. Third, even though voters choose redistributive policies with lower nominal value in open economies, the actual extent of redistribution in equilibrium is larger in the open than in the closed economy. We discuss our results in the context of the debate about the effects of globalisation on government activity.

Suggested Citation

  • Gonzague Vannoorenberghe & Eckhard Janeba, 2013. "Trade and the Political Economy of Redistribution," CESifo Working Paper Series 4062, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_4062
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    References listed on IDEAS

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    Cited by:

    1. Vannoorenberghe, G. & Janeba, E., 2016. "Trade and the political economy of redistribution," Journal of International Economics, Elsevier, vol. 98(C), pages 233-244.
    2. Çürük, M., 2014. "Essays on economic growth and international trade," Other publications TiSEM 323b2713-dc19-4ce8-940e-1, Tilburg University, School of Economics and Management.
    3. repec:eee:inecon:v:108:y:2017:i:c:p:20-36 is not listed on IDEAS

    More about this item

    Keywords

    international trade; redistribution; political economy; factor mobility;

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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