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Trade Policy in Majoritarian Systems: The Case of the U.S

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  • Per G. Fredriksson
  • Xenia Matschke
  • Jenny Minier

Abstract

We provide a theory of trade policy determination that incorporates the protectionist bias inherent in majoritarian systems, suggested by Grossman and Helpman (2005). The prediction that emerges is that in majoritarian systems, the majority party favors industries located disproportionately in majority districts. We test this prediction using U.S. data on tariffs, Congressional campaign contributions, and industry location in districts represented by the majority party over the period 1989-97. We find evidence of a significant majority bias in trade policy: the benefit to being represented by the majority party appears at least as large in magnitude as the benefit to lobbying.

Suggested Citation

  • Per G. Fredriksson & Xenia Matschke & Jenny Minier, 2011. "Trade Policy in Majoritarian Systems: The Case of the U.S," Research Papers in Economics 2011-01, University of Trier, Department of Economics.
    • Handle: RePEc:trr:wpaper:201101
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    References listed on IDEAS

    as
    1. Gene M. Grossman & Elhanan Helpman, 2005. "A Protectionist Bias in Majoritarian Politics," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(4), pages 1239-1282.
    2. Hiau Looi Kee & Alessandro Nicita & Marcelo Olarreaga, 2008. "Import Demand Elasticities and Trade Distortions," The Review of Economics and Statistics, MIT Press, vol. 90(4), pages 666-682, November.
    3. Marcelin Joanis, 2011. "The road to power: partisan loyalty and the centralized provision of local infrastructure," Public Choice, Springer, vol. 146(1), pages 117-143, January.
    4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    5. Matschke, Xenia, 2008. "Costly revenue-raising and the case for favoring import-competing industries," Journal of International Economics, Elsevier, vol. 74(1), pages 143-157, January.
    6. Stephen Ansolabehere & James M. Snyder, 2006. "Party Control of State Government and the Distribution of Public Expenditures," Scandinavian Journal of Economics, Wiley Blackwell, vol. 108(4), pages 547-569, December.
    7. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
    8. Xenia Matschke & Shane M. Sherlund, 2006. "Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation," American Economic Review, American Economic Association, vol. 96(1), pages 405-421, March.
    9. Gian Maria Milesi-Ferretti & Roberto Perotti & Massimo Rostagno, 2002. "Electoral Systems and Public Spending," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 609-657.
    10. Josh Ederington & Jenny Minier, 2008. "Reconsidering the empirical evidence on the Grossman‐Helpman model of endogenous protection," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(2), pages 501-516, May.
    11. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
    12. Baldwin, Robert E & Magee, Christopher S, 2000. "Is Trade Policy for Sale? Congressional Voting on Recent Trade Bills," Public Choice, Springer, vol. 105(1-2), pages 79-101, October.
    13. Nicola Persico & Alessandro Lizzeri, 2001. "The Provision of Public Goods under Alternative Electoral Incentives," American Economic Review, American Economic Association, vol. 91(1), pages 225-239, March.
    14. Theo Eicher & Thomas Osang, 2002. "Protection for Sale: An Empirical Investigation: Comment," American Economic Review, American Economic Association, vol. 92(5), pages 1702-1710, December.
    15. Carolyn L. Evans, 2009. "A Protectionist Bias In Majoritarian Politics: An Empirical Investigation," Economics and Politics, Wiley Blackwell, vol. 21(2), pages 278-307, July.
    16. Torsten Persson & Guido Tabellini, 2004. "Constitutional Rules and Fiscal Policy Outcomes," American Economic Review, American Economic Association, vol. 94(1), pages 25-45, March.
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    Cited by:

    1. Giacomo A. M. Ponzetto & Maria Petrova & Ruben Enikolopov, 2008. "The Dracula effect: voter information and trade policy," Economics Working Papers 1296, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2020.
    2. Lake, James, 2015. "Revisiting the link between PAC contributions and lobbying expenditures," European Journal of Political Economy, Elsevier, vol. 37(C), pages 86-101.
    3. Adina Ardelean & Carolyn L. Evans, 2013. "Electoral systems and protectionism: an industry‐level analysis," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 46(2), pages 725-764, May.
    4. Celik, Levent & Karabay, Bilgehan & McLaren, John, 2013. "Trade policy-making in a model of legislative bargaining," Journal of International Economics, Elsevier, vol. 91(2), pages 179-190.
    5. Xiangjun Ma & John McLaren, 2018. "A Swing-State Theorem, with Evidence," NBER Working Papers 24425, National Bureau of Economic Research, Inc.
    6. Kagitani, Koichi & Harimaya, Kozo, 2017. "Electoral motives, constituency systems, ideologies, and a free trade agreement: The case of Japan joining the Trans-Pacific Partnership negotiations," Journal of the Japanese and International Economies, Elsevier, vol. 45(C), pages 51-66.

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    More about this item

    Keywords

    trade policy; majority bias; political economy;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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