Working Paper: NBER ID: w9631
Authors: Pravin Krishna; Devashish Mitra
Abstract: Using the menu-auction approach to endogenous determination of tariffs and allowing additionally for lobby formation itself to be endogenous, this paper analyzes the impact of unilateral trade liberalization by one country on its partner's trade policies. We find that such unilateral liberalization may induce reciprocal tariff reductions by the partner country. Intuitively, unilateral liberalization by one country has the effect of increasing the incentives for the export lobby in the partner country to form and to lobby effectively against the import-competing lobby there for lower protection.
Keywords: No keywords provided
JEL Codes: F13; F10; F02
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Unilateral trade liberalization by one country (F10) | Formation of export lobbies in partner country (F10) |
| Formation of export lobbies in partner country (F10) | Reciprocal tariff reductions (F13) |
| Unilateral trade liberalization by one country (F10) | Reciprocal tariff reductions (F13) |