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What Does the Political Economy Literature on Trade Policy (Not) Tell UsThat We Ought To Know?

  • Dani Rodrik

Three questions lie at the core of the large and distinguished literature on the political economy of trade policy. First, why is international trade not free? Second, why are trade policies universally biased against (rather than in favor of) trade? Third, what are the determinants of the variation in protection levels across industries, countries, and institutional contexts? These questions are handled only imperfectly by the existing literature. Current models treat trade policy as a redistributive tool, but do not explain why it emerges in political equilibrium in preference over more direct policy instruments. Further, existing models do not generate a bias against trade, implying that pro-trade interventions are as likely as trade-restricting interventions. The greatest contribution of the political economy literature may lie in developing a better grasp of normative economic analysis--that is, in helping design policies, rules, and institutions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4870.

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Date of creation: Sep 1994
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Publication status: published as "The Political Economy of Trade Policy," 1996, in G. Grossman and K.Rogoff,eds., Handbook of International Economics, Vol. III, North-Holland, Amsterdam.
Handle: RePEc:nbr:nberwo:4870
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