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Reciprocated Unilateralism in Trade Reforms with Majority Voting

  • Pravin Krishna
  • Devashish Mitra

This paper shows how unilateral liberalization in one country can increase the voting support for reciprocal reduction in trade barriers in a partner country. When trade policies are determined simultaneously in the two countries, we show the possibility of multiple political equilibria - countries may both be protectionist or trade freely with each other. Starting with trade protection in both countries, a unilateral reform in one country is thus shown to bring about a free trade equilibrium (a self-enforcing state) that is consistent with majority voting in both countries.

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File URL: http://www.nber.org/papers/w10826.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10826.

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Date of creation: Oct 2004
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Publication status: published as Krishna, Pravin, and Devashish Mitra. "Reciprocated Unilateralism in Trade Reforms with Majority Voting." Journal of Development Economics 85(1-2): 81-93, February 2008
Handle: RePEc:nbr:nberwo:10826
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  1. Gordon H. Hanson & Antonio Spilimbergo, 2001. "Political economy, sectoral shocks, and border enforcement," Canadian Journal of Economics, Canadian Economics Association, vol. 34(3), pages 612-638, August.
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  3. Alvaro Forteza & Daniel Buquet & Mario Ibarburu & Jorge Lanzaro & Andrés Pereyra & Eduardo Siandra & Marcel Vaillant, 2003. "Understanding reform. The Uruguayan case," Documentos de Trabajo (working papers) 0603, Department of Economics - dECON.
  4. Rodrik, Rani, 1995. "Trade and industrial policy reform," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 3, chapter 45, pages 2925-2982 Elsevier.
  5. Grossman, Gene & Helpman, Elhanan, 1993. "Trade Wars and Trade Talks," CEPR Discussion Papers 806, C.E.P.R. Discussion Papers.
  6. Bagwell,K. & Staiger,R.W., 1998. "An economic theory of GATT," Working papers 15, Wisconsin Madison - Social Systems.
  7. Coates, Daniel E. & Ludema, Rodney D., 2001. "A theory of trade policy leadership," Journal of Development Economics, Elsevier, vol. 65(1), pages 1-29, June.
  8. Limao Nuno & Panagariya Arvind, 2004. "Anti-trade Bias in Trade Policy and General Equilibrium," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 3(1), pages 1-21, September.
  9. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  10. Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
  11. Dutt, Pushan & Mitra, Devashish, 2002. "Endogenous trade policy through majority voting: an empirical investigation," Journal of International Economics, Elsevier, vol. 58(1), pages 107-133, October.
  12. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  13. Mayer, Wolfgang, 1981. "Theoretical Considerations on Negotiated Tariff Adjustments," Oxford Economic Papers, Oxford University Press, vol. 33(1), pages 135-53, March.
  14. Krishna, Pravin & Mitra, Devashish, 2005. "Reciprocated unilateralism in trade policy," Journal of International Economics, Elsevier, vol. 65(2), pages 461-487, March.
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