IDEAS home Printed from https://ideas.repec.org/p/exe/wpaper/1403.html
   My bibliography  Save this paper

A Theory of Trade Policy Under Dictatorship and Democratization

Author

Listed:
  • Ben Zissimos

    (Department of Economics, University of Exeter)

Abstract

This paper develops a new model of trade policy under dictatorship and democratization. The paper makes two contributions. One is to provide a deeper understanding of the relationship between political institutions and economic performance by studying the endogenous interaction between the form of government and trade policy. If a ruling elite own a factor that is scarce then democratization goes hand in hand with trade liberalization and an increase in economic efficiency, as argued by classical scholars. But if the elite own an abundant factor then democratization is accompanied by an increase in protectionism and a reduction in e¢ ciency. The paper also characterizes the circumstances under which a dictatorship can use trade policy to forestall democratization. The paper?s second contribution is to show how trade policy can be manipulated to maintain the status quo in the face of world price shocks, thus opening the door to a re-examination of trade policy responses to technology shocks. The model is used to explain an interesting episode of trade policymaking between 1815 and 1846, during which time Britain substantially liberalized trade while Prussia, on the other side of the grain market, signi?cantly increased protectionism. It is also used to shed light on the wide-spread imposition of export restrictions in response to the 2007-08 food crisis.

Suggested Citation

  • Ben Zissimos, 2014. "A Theory of Trade Policy Under Dictatorship and Democratization," Discussion Papers 1403, University of Exeter, Department of Economics.
  • Handle: RePEc:exe:wpaper:1403
    as

    Download full text from publisher

    File URL: http://people.exeter.ac.uk/RePEc/dpapers/DP1403.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrei A. Levchenko, 2013. "International Trade and Institutional Change," Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(5), pages 1145-1181, October.
    2. Humberto Llavador & Robert J. Oxoby, 2005. "Partisan Competition, Growth, and the Franchise," The Quarterly Journal of Economics, Oxford University Press, vol. 120(3), pages 1155-1189.
    3. Tyers,Rod & Anderson,Kym, 2011. "Disarray in World Food Markets," Cambridge Books, Cambridge University Press, number 9780521172318, October.
    4. Jack, William & Lagunoff, Roger, 2006. "Dynamic enfranchisement," Journal of Public Economics, Elsevier, vol. 90(4-5), pages 551-572, May.
    5. Costinot, Arnaud, 2009. "On the origins of comparative advantage," Journal of International Economics, Elsevier, vol. 77(2), pages 255-264, April.
    6. Timothy Besley & Torsten Persson, 2011. "Pillars of Prosperity: The Political Economics of Development Clusters," Economics Books, Princeton University Press, edition 1, number 9624, October.
    7. Nathan Nunn, 2007. "Relationship-Specificity, Incomplete Contracts, and the Pattern of Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 122(2), pages 569-600.
    8. Xuepeng Liu & Emanuel Ornelas, 2014. "Free Trade Agreements and the Consolidation of Democracy," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(2), pages 29-70, April.
    9. Aidt, Toke S. & Jensen, Peter S., 2014. "Workers of the world, unite! Franchise extensions and the threat of revolution in Europe, 1820–1938," European Economic Review, Elsevier, vol. 72(C), pages 52-75.
    10. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-1187, December.
    11. Toke S. Aidt & Martin Gassebner, 2010. "Do Autocratic States Trade Less?," World Bank Economic Review, World Bank Group, vol. 24(1), pages 38-76, January.
    12. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "The Value of Trade Agreements in the Presence of Political Pressures," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 574-601, June.
    13. Quy-Toan Do & Andrei A. Levchenko & Martin Ravallion, 2014. "Trade Insulation as Social Protection," NBER Chapters,in: The Economics of Food Price Volatility, pages 345-366 National Bureau of Economic Research, Inc.
    14. La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. " Legal Determinants of External Finance," Journal of Finance, American Finance Association, vol. 52(3), pages 1131-1150, July.
    15. Kindleberger, C. P., 1975. "The Rise of Free Trade in Western Europe, 1820–1875," The Journal of Economic History, Cambridge University Press, vol. 35(01), pages 20-55, March.
    16. Jessica Decker & Jamus Lim, 2009. "Democracy and trade: an empirical study," Economics of Governance, Springer, vol. 10(2), pages 165-186, April.
    17. Daron Acemoglu & James A. Robinson, 2001. "A Theory of Political Transitions," American Economic Review, American Economic Association, vol. 91(4), pages 938-963, September.
    18. Paul J. Burke & Andrew Leigh, 2010. "Do Output Contractions Trigger Democratic Change?," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(4), pages 124-157, October.
    19. Kevin H. O'Rourke & Alan M. Taylor, 2006. "Democracy and Protectionism," NBER Working Papers 12250, National Bureau of Economic Research, Inc.
    20. Daron Acemoglu & James A. Robinson, 2000. "Why Did the West Extend the Franchise? Democracy, Inequality, and Growth in Historical Perspective," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1167-1199.
    21. Dani Rodrik, 2007. "Introductiion to One Economics, Many Recipes: Globalization, Institutions, and Economic Growth," Introductory Chapters,in: One Economics, Many Recipes: Globalization, Institutions, and Economic Growth Princeton University Press.
    22. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    23. Chipman, John S, 1969. "Factor Price Equalization and the Stolper-Samuelson Theorem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 10(3), pages 399-406, October.
    24. Bagwell, Kyle & Staiger, Robert W, 1990. "A Theory of Managed Trade," American Economic Review, American Economic Association, vol. 80(4), pages 779-795, September.
    25. Andrei A. Levchenko, 2007. "Institutional Quality and International Trade," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 791-819.
    26. Toke Aidt & Peter Jensen, 2009. "Tax structure, size of government, and the extension of the voting franchise in Western Europe, 1860–1938," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 16(3), pages 362-394, June.
    27. Chor, Davin, 2010. "Unpacking sources of comparative advantage: A quantitative approach," Journal of International Economics, Elsevier, vol. 82(2), pages 152-167, November.
    28. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
    29. Galiani, Sebastian & Torrens, Gustavo, 2014. "Autocracy, democracy and trade policy," Journal of International Economics, Elsevier, vol. 93(1), pages 173-193.
    30. Acemoglu,Daron & Robinson,James A., 2009. "Economic Origins of Dictatorship and Democracy," Cambridge Books, Cambridge University Press, number 9780521671422, October.
    31. Alessandro Lizzeri & Nicola Persico, 2004. "Why did the Elites Extend the Suffrage? Democracy and the Scope of Government, with an Application to Britain's "Age of Reform"," The Quarterly Journal of Economics, Oxford University Press, vol. 119(2), pages 707-765.
    32. Bagwell Kyle & Staiger Robert W., 2003. "Protection and the Business Cycle," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-45, September.
    33. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
    34. Daron Acemoglu & Simon Johnson & James A. Robinson, 2001. "The Colonial Origins of Comparative Development: An Empirical Investigation," American Economic Review, American Economic Association, vol. 91(5), pages 1369-1401, December.
    35. Garfinkel, Michelle R. & Skaperdas, Stergios & Syropoulos, Constantinos, 2008. "Globalization and domestic conflict," Journal of International Economics, Elsevier, vol. 76(2), pages 296-308, December.
    36. Robert W. Staiger & Kyle Bagwell, 1999. "An Economic Theory of GATT," American Economic Review, American Economic Association, vol. 89(1), pages 215-248, March.
    37. Constantinos Syropoulos, 2002. "On Tariff Preferences And Delegation Decisions In Customs Unions: A Heckscher--Ohlin Approach," Economic Journal, Royal Economic Society, vol. 112(481), pages 625-648, July.
    38. repec:hrv:faseco:30728041 is not listed on IDEAS
    39. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557-557.
    40. Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592, January.
    41. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, vol. 78(4), pages 719-745, September.
    42. Cheryl Schonhardt-Bailey, 2006. "From the Corn Laws to Free Trade: Interests, Ideas, and Institutions in Historical Perspective," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262195437, January.
    43. Jeffrey G. Williamson, 2012. "Commodity Prices over Two Centuries: Trends, Volatility, and Impact," Annual Review of Resource Economics, Annual Reviews, vol. 4(1), pages 185-206, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Olper, Alessandro & Curzi, Daniele & Swinnen, Johan, 2018. "Trade liberalization and child mortality: A Synthetic Control Method," World Development, Elsevier, vol. 110(C), pages 394-410.
    2. Ben Zissimos, 2015. "World Price Shocks, Income, and Democratization," World Bank Economic Review, World Bank Group, vol. 29(suppl_1), pages 145-154.

    More about this item

    Keywords

    Efficiency; institutions; protectionism; social con?ict; trade policy.;

    JEL classification:

    • D30 - Microeconomics - - Distribution - - - General
    • D74 - Microeconomics - - Analysis of Collective Decision-Making - - - Conflict; Conflict Resolution; Alliances; Revolutions
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • P14 - Economic Systems - - Capitalist Systems - - - Property Rights

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:exe:wpaper:1403. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jingnan (Cecilia) Chen). General contact details of provider: http://edirc.repec.org/data/deexeuk.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.