Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy
This paper analyzes the dynamics of trade policy reform under democracy. In an overlapping generations model, heterogeneous agents may acquire skills when young, thereby determining the skill composition of their cohort. Current and anticipated trade policies influence education decisions, and thus the identity of the median voter. We show that there may exist two political steady states: one protectionist and one liberal. Transition from the former to the latter can be achieved by government announcements, temporary educational subsidies, or (exogenous) tariff liberalization by trading partners, but not, in general, by transfer payments to adversely affected workers. We find additionally that reform is politically feasible only if the proposed liberalization is sufficiently large, suggesting that radical reform may be necessary for escaping a ?protectionist rut.?
|Date of creation:||2007|
|Contact details of provider:|| Postal: D-24098 Kiel,Wilhelm-Seelig-Platz 1|
Phone: 0431-880 3282
Fax: 0431-880 3150
Web page: http://www.vwl.uni-kiel.de/en
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maggi, G & Rodriguez-Clare, A, 1996.
"The Value of Trade Agreements in the Presence of Political Pressures,"
180, Princeton, Woodrow Wilson School - Public and International Affairs.
- Giovanni Maggi & Andres Rodriguez-Clare, 1998. "The Value of Trade Agreements in the Presence of Political Pressures," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 574-601, June.
- Francesc Ortega, 2004.
"Immigration and the survival of the welfare state,"
Economics Working Papers
815, Department of Economics and Business, Universitat Pompeu Fabra.
- Giovanni Maggi & Andres Rodriguez-Clare, 2005.
"A Political-Economy Theory of Trade Agreements,"
NBER Working Papers
11716, National Bureau of Economic Research, Inc.
- Ngo Van Long & Raymond Riezman & Antoine Soubeyran, 2007.
"Trade, Wage Gaps, and Specific Human Capital Accumulation,"
Review of International Economics,
Wiley Blackwell, vol. 15(1), pages 75-92, 02.
- Ngo Van Long & Raymond Riezman & Antoine Soubeyran, 2003. "Trade, Wage Gaps, and Specific Human Capital Accumulation," CESifo Working Paper Series 911, CESifo Group Munich.
- Yeaple, Stephen Ross, 2005. "A simple model of firm heterogeneity, international trade, and wages," Journal of International Economics, Elsevier, vol. 65(1), pages 1-20, January.
- Rod Falvey & David Greenaway & Joana Silva, "undated".
"Trade Liberalisation and Human Capital Adjustment,"
07/34, University of Nottingham, GEP.
- John McLaren, 2002. "A Theory of Insidious Regionalism," The Quarterly Journal of Economics, Oxford University Press, vol. 117(2), pages 571-608.
- Glomm, Gerhard & Ravikumar, B., 1996. "Endogenous public policy and multiple equilibria," European Journal of Political Economy, Elsevier, vol. 11(4), pages 653-662, April.
- Franziska Ohnsorge & Daniel Trefler, 2004. "Sorting It Out: International Trade and Protection With Heterogeneous Workers," NBER Working Papers 10959, National Bureau of Economic Research, Inc.
- Carl Davidson & Steven J. Matusz, 2004. "An Overlapping-generations Model of Escape Clause Protection," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 749-768, November.
- Willmann, Gerald, 2004. "Pareto gains from trade: a dynamic counterexample," Economics Letters, Elsevier, vol. 83(2), pages 199-204, May.
- Marco Bassetto, 2008.
"Political Economy of Taxation in an Overlapping-Generations Economy,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 11(1), pages 18-43, January.
- Marco Bassetto, 1999. "Political economy of taxation in an overlapping-generations economy," Discussion Paper / Institute for Empirical Macroeconomics 133, Federal Reserve Bank of Minneapolis.
- Pravin Krishna & Devashish Mitra, 2004.
"Reciprocated Unilateralism in Trade Reforms with Majority Voting,"
NBER Working Papers
10826, National Bureau of Economic Research, Inc.
- Krishna, Pravin & Mitra, Devashish, 2008. "Reciprocated unilateralism in trade reforms with majority voting," Journal of Development Economics, Elsevier, vol. 85(1-2), pages 81-93, February.
- Carl Davidson & Steven J. Matusz, 2006. "Long-run Lunacy, Short-run Sanity: a Simple Model of Trade with Labor Market Turnover," Review of International Economics, Wiley Blackwell, vol. 14(2), pages 261-276, 05.
- Christopher Magee & Carl Davidson & Steven Matusz, 2005.
"Trade, Turnover, and Tithing,"
- Per Krusell & José-Víctor Ríos-Rull, 1996.
"Vested Interests in a Positive Theory of Stagnation and Growth,"
Review of Economic Studies,
Oxford University Press, vol. 63(2), pages 301-329.
- Krusell, P. & Rios-Rull, J.V., 1993. "Vested Interests in a Positive Theory of Stagnation and Growth," Papers 547, Stockholm - International Economic Studies.
- Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-837, December.
- Krishna, Pravin & Mitra, Devashish, 2005. "Reciprocated unilateralism in trade policy," Journal of International Economics, Elsevier, vol. 65(2), pages 461-487, March.
- Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
- Krusell, Per & Quadrini, Vincenzo & Rios-Rull, Jose-Victor, 1996. "Are consumption taxes really better than income taxes?," Journal of Monetary Economics, Elsevier, vol. 37(3), pages 475-503, June.
- Theo S. Eicher, 1996. "Interaction Between Endogenous Human Capital and Technological Change," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 127-144.
- 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 1146-1155, December.
- Davidson, Carl & Matusz, Steven J. & Nelson, Douglas R., 2007. "Can compensation save free trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 167-186, March.
- Findlay, Ronald & Kierzkowski, Henryk, 1983. "International Trade and Human Capital: A Simple General Equilibrium Model," Journal of Political Economy, University of Chicago Press, vol. 91(6), pages 957-978, December.
When requesting a correction, please mention this item's handle: RePEc:zbw:cauewp:5862. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)
If references are entirely missing, you can add them using this form.