Working Paper: CEPR ID: DP5238
Authors: Gene Grossman; Elhanan Helpman
Abstract: We develop a novel model of campaigns, elections, and policymaking in which the ex ante objectives of national party leaders differ from the ex post objectives of elected legislators. This generates a distinction between "policy rhetoric" and "policy reality" and introduces an important role for "party discipline" in the policymaking process. We identify a protectionist bias in majoritarian politics. When trade policy is chosen by the majority delegation and legislators in the minority have limited means to influence choices, the parties announce trade policies that favor specific factors, and the expected tariff or export subsidy is positive. Positions and expected outcomes monotonically approach free trade as party discipline strengthens.
Keywords: Comparative Politics; Party Discipline; Trade Policy; Tyranny of the Majority
JEL Codes: D72; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Inability to commit (D91) | Divergence between campaign promises and actual policy decisions (D78) |
| Majority interests outweigh minority interests (G34) | Protectionist bias in trade policy (F13) |
| Differences in ownership shares of industry-specific factors (D33) | Protectionist bias in trade policy (F13) |
| Strengthening party discipline (D72) | Decrease in protectionist bias (F14) |
| Convexity of profit functions (D21) | Increase in marginal benefits of protection with positive tariffs (D69) |
| Strengthening party discipline (D72) | Expected outcomes approach free trade (F10) |