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Trade, Factor Proportions and Political Rights

  • Tavares, Jose

This paper tests the implication of the Stolper-Samuelson theorem that capital-poor individuals prefer more trade openness in poor (capital-scarce) countries and less trade in rich (labor-scarce) countries, by using a broad panel of countries and new exogenous determinants of trade openness. According to the seminal work in Mayer (1984), capital-poor individuals prefer more trade openness in poor (capital-scarce) countries and less trade openness in rich (labor-scarce) countries. We use the level of political rights as a proxy for the relative capital-labor endowment of the median voter so that an increase in political rights should have asymmetric effects in poor and rich countries: an increase in political rights should lead to more openness in capital poor countries and less openness in capital rich countries. Our results show that, while both income per capita and political rights are positively associated with import intensity, their interaction has a negative and very robust negative association with openness. Increases in political rights lead to sizeable decreases in import intensity after a given income per capita threshold has been surpassed. Our results are robust to the inclusion of structural, geography and cultural determinants of openness, different estimation methods and different proxies for country endowments.

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Paper provided by Universidade Nova de Lisboa, Faculdade de Economia in its series FEUNL Working Paper Series with number wp437.

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Length: 24 pages
Date of creation: 2003
Date of revision:
Handle: RePEc:unl:unlfep:wp437
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  1. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: A Skeptic's Guide to Cross-National Evidence," NBER Working Papers 7081, National Bureau of Economic Research, Inc.
  2. Mayda, Anna Maria & Rodrik, Dani, 2001. "Why are Some People (and Countries) More Protectionist than Others?," CEPR Discussion Papers 2960, C.E.P.R. Discussion Papers.
  3. Donald R. Davis, 1996. "Trade Liberalization and Income Distribution," Harvard Institute of Economic Research Working Papers 1769, Harvard - Institute of Economic Research.
  4. Jong-Wha Lee & Phillip Swagel, 2000. "Trade Barriers And Trade Flows Across Countries And Industries," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 372-382, August.
  5. Alberto Alesina & Romain Wacziarg, 1997. "Openness, Country Size and the Government," NBER Working Papers 6024, National Bureau of Economic Research, Inc.
  6. Kenneth F. Scheve & Matthew J. Slaughter, 1998. "What Determines Individual Trade Policy Preferences?," NBER Working Papers 6531, National Bureau of Economic Research, Inc.
  7. Edward J. Balistreri, 1997. "The Performance of the Heckscher-Ohlin-Vanek Model in Predicting Endogenous Policy Forces at the Individual Level," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 1-17, February.
  8. Tavares, Jose & Wacziarg, Romain, 2001. "How democracy affects growth," European Economic Review, Elsevier, vol. 45(8), pages 1341-1378, August.
  9. 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.
  10. Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
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