Working Paper: NBER ID: w4870
Authors: Dani Rodrik
Abstract: Three questions lie at the core of the large and distinguished literature on the political economy of trade policy. First, why is international trade not free? Second, why are trade policies universally biased against (rather than in favor of) trade? Third, what are the determinants of the variation in protection levels across industries, countries, and institutional contexts? These questions are handled only imperfectly by the existing literature. Current models treat trade policy as a redistributive tool, but do not explain why it emerges in political equilibrium in preference over more direct policy instruments. Further, existing models do not generate a bias against trade, implying that pro-trade interventions are as likely as trade-restricting interventions. The greatest contribution of the political economy literature may lie in developing a better grasp of normative economic analysis--that is, in helping design policies, rules, and institutions.
Keywords: trade policy; political economy; protection levels
JEL Codes: F13; F5
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political equilibrium (D50) | trade policies biased against trade (F13) |
| individual economic interests (F52) | trade policy outcomes (F13) |
| political organization (F53) | trade policy outcomes (F13) |
| trade interventions (F13) | economic impacts on different sectors and factors of production (F61) |