Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/307333 
Year of Publication: 
2024
Series/Report no.: 
CESifo Working Paper No. 11403
Publisher: 
CESifo GmbH, Munich
Abstract: 
I study how political competition affects the feasibility of free trade agreements (FTAs). I show that the possibility of political turnover creates strategic motivations for the formation of FTAs. Specifically, a government facing a high enough probability of losing power will have an incentive to form a trading bloc to "tie the hands" of its successor. This incentive mitigates inefficiencies in the incumbent's decision to form FTAs, regardless of its bias toward special interests. An FTA can affect the likelihood of political turnover as well. Accounting for that effect, I show that an incumbent party with a known bias toward special interests could seek an FTA as a commitment device toward less distortionary policies, thereby enhancing its own electoral prospects. Overall, the analysis reveals the importance of considering the time horizon of policymakers when studying their decision to enter in FTAs.
Subjects: 
regionalism
free trade agreements
political competition
lobbying
JEL: 
F15
F13
D72
Document Type: 
Working Paper
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