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Title:Political Stasis or Protectionist Rut? Policy Mechanisms for Trade Reform in a Democracy PDF Logo
Authors:Willmann, Gerald
Blanchard, Emily J.
Issue Date:2007
Series/Report no.:Economics working paper / Christian-Albrechts-Universität Kiel, Department of Economics 2007,21
Abstract:This paper analyzes the dynamics of trade policy reform under democracy. In an overlapping generations model, heterogeneous agents may acquire skills when young, thereby determining the skill composition of their cohort. Current and anticipated trade policies influence education decisions, and thus the identity of the median voter. We show that there may exist two political steady states: one protectionist and one liberal. Transition from the former to the latter can be achieved by government announcements, temporary educational subsidies, or (exogenous) tariff liberalization by trading partners, but not, in general, by transfer payments to adversely affected workers. We find additionally that reform is politically feasible only if the proposed liberalization is sufficiently large, suggesting that radical reform may be necessary for escaping a ?protectionist rut.?
Subjects:Political Economy
Trade Policy
Skill Acquisition
Politically Stable Policy Paths
Referenda
JEL:D72
E60
F13
F16
Document Type:Working Paper
Appears in Collections:Economics Working Papers, Department of Economics, CAU Kiel

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