Working Paper: CEPR ID: DP5698
Authors: Kevin H. O'Rourke; Alan M. Taylor
Abstract: Does democracy encourage free trade? It depends. Broadening the franchise involves transferring power from non-elected elites to the wider population, most of whom will be workers. The Hecksher-Ohlin-Stolper-Samuelson logic says that democratization should lead to more liberal trade policies in countries where workers stand to gain from free trade; and to more protectionist policies in countries where workers will benefit from the imposition of tariffs and quotas. We test and confirm these political economy implications of trade theory hypothesis using data on democracy, factor endowments, and protection in the late nineteenth century.
Keywords: factor endowments; Heckscher-Ohlin; trade theory; Stolper-Samuelson theorem; tariffs
JEL Codes: F11; F13; N70
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Factor endowments (D33) | Trade policy preferences (F13) |
| Franchise broadening (L14) | Shift in median voter's preferences towards laborers (J79) |
| Democratization (O17) | More liberal trade policies in labor-abundant countries (F16) |
| Democratization (O17) | More protectionist policies in land-abundant countries (F14) |
| Democratization (O17) | Tariff levels (F14) |
| Democratization (O17) | Tariffs in high land-labor ratio countries (F16) |
| Democratization (O17) | Tariffs in low land-labor ratio countries (F16) |