Working Paper: NBER ID: w11014
Authors: Gene M. 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: Protectionism; Majoritarian Politics; Trade Policy
JEL Codes: D72; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| ownership shares of industry-specific factors (D33) | protectionist bias (F52) |
| party discipline (D72) | protectionist bias (F52) |
| party discipline is less than perfect (D72) | positive response of industry outputs to prices (L11) |
| majority party can set trade policies (F13) | nonnegative tariffs or export subsidies (F14) |
| weak party discipline (D72) | positive expected tariff or export subsidy (F14) |
| unequal distribution of capital ownership across districts (D33) | larger protectionist bias (F14) |
| party discipline (D72) | trade policy outcomes (F13) |
| capital ownership (P12) | trade policy outcomes (F13) |