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How and When a Unilateral Trade Reform Could be a Political Equilibrium


  • Marcel Vaillant

    (Universidad de la Republica)


In the paper the endogenous trade model follows the Grosman and Helpman (1994 y 1995) tradition. The structure of the economy is characterised by a specific factor trade model and consumers' preferences are quasilinears. Owners of specific factors all are organised in lobby groups and the ownership are very concentrated.The available options to the government are mantain the trade policy status quo or implement an opening trade reform. Lobbys group influence this discretional government with income contribution taking into account its own objective function. The equilibrium of the game is studied in two differents situations: without exceptions in the trade liberalisation; with the presence of sector exception list. It is shown that a commercial opening that is not a political equilibrium (it is not incentives compatible) when the government wants to make it in general, however can be so if the government is able to isolate certain sectors from the international competition, through long periods of adjustment (given by gradual policies or the existence of exceptions list).

Suggested Citation

  • Marcel Vaillant, 2000. "How and When a Unilateral Trade Reform Could be a Political Equilibrium," Econometric Society World Congress 2000 Contributed Papers 0970, Econometric Society.
  • Handle: RePEc:ecm:wc2000:0970

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    References listed on IDEAS

    1. Isabel Correia & Juan Pablo Nicolini & Pedro Teles, 2008. "Optimal Fiscal and Monetary Policy: Equivalence Results," Journal of Political Economy, University of Chicago Press, vol. 116(1), pages 141-170, February.
    2. Charles T. Carlstrom & Timothy S. Fuerst, 1998. "Price-level and interest-rate targeting in a model with sticky prices," Working Paper 9819, Federal Reserve Bank of Cleveland.
    3. Bernardino Adão & Isabel Correia & Pedro Teles, 2003. "Gaps and Triangles," Review of Economic Studies, Oxford University Press, vol. 70(4), pages 699-713.
    4. Sargent, Thomas J & Wallace, Neil, 1975. ""Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule," Journal of Political Economy, University of Chicago Press, vol. 83(2), pages 241-254, April.
    5. Fuerst, Timothy S., 1992. "Liquidity, loanable funds, and real activity," Journal of Monetary Economics, Elsevier, vol. 29(1), pages 3-24, February.
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