Social Conflict and the Stolper-Samuelson Theorem
This paper presents a new theory of trade policy-making based on the possibility of social conflict, and determines the conditions under which it will apply. In a setting where property rights are poorly enforced, the paper shows that the Stolper-Samuelson theorem embodies a set of sufficient conditions for a revolution to occur. By pinpointing a conflict of interest between the ruling elite and workers over trade policy, the theorem implies that workers may have an incentive to mount a revolution. However, this also implies that the elite can use trade policy to make concessions to the workers and hence avert a revolution. In an extended framework, a set of sufficient conditions for revolution to occur are provided even when the Stolper-Samuelson theorem fails to hold. Among other uses, the new theory presents a resolution to the long-standing puzzle over why Britain repealed the Corn Laws.
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- Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-1187, December.
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- 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, September.
- Ruffin, Roy & Jones, Ronald, 1977. "Protection and real wages: The neoclassical ambiguity," Journal of Economic Theory, Elsevier, vol. 14(2), pages 337-348, April.
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