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 Among other uses, the new theory presents a resolution to the long-standing puzzle over why Britain repealed the Corn Laws.
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- Kevin H. O'Rourke & Jeffrey G. Williamson, 2001. "Globalization and History: The Evolution of a Nineteenth-Century Atlantic Economy," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262650592, June.
- 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, June.
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