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Trade Policy Determinants and Trade Reform in a Developing Country: The Case of Colombia

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  • Baybars Karacaovali

    (Department of Economics, University of Hawaii at Manoa)

Abstract

In this paper, I start out with a standard political economy of trade policy model to guide the subsequent estimation of the determinants of trade policy in a developing country. I carefully test the model with Colombian data from 1983 to 1998 accounting for endogeneity and omitted variable bias concerns and then expand it empirically in several directions. I show that it is important to control for the impact of a drastic trade reform shock that affects all sectors and disentangle its e¤ect from preferential trade agreements (PTAs). I find that protection is higher in sectors that are important exports for preferential partners which may be seen as a stumbling block effect of PTAs for Colombia. I also relax the assumption of ?xed political weights that measure the extra importance of producers?welfare relative to consumers in the government objective. I measure the impact of sectoral characteristics on tari¤s indirectly through political weights as a novel alternative to nonstructurally estimating them as determinants of protection. Accordingly, I obtain more realistic estimates for the political weights further contributing to the literature.

Suggested Citation

  • Baybars Karacaovali, 2012. "Trade Policy Determinants and Trade Reform in a Developing Country: The Case of Colombia," Working Papers 201220R, University of Hawaii at Manoa, Department of Economics.
  • Handle: RePEc:hai:wpaper:201220r
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    File URL: http://www.economics.hawaii.edu/research/workingpapers/WP_12-20R.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Political economy of trade policy; trade liberalization; preferential trade agreements; empirical trade;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration

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