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Trade policy-making in a model of legislative bargaining

Celik, L. ORCID: 0000-0002-7668-6358, Karabay, B. and McLaren, J. (2013). Trade policy-making in a model of legislative bargaining. Journal of International Economics, 91(2), pp. 179-190. doi: 10.1016/j.jinteco.2013.09.001

Abstract

In democracies, trade policy is the result of interactions among many agents with different agendas. In accordance with this observation, we construct a dynamic model of legislative trade policy-making in the realm of distributive politics. An economy consists of different sectors, each of which is concentrated in one or more electoral districts. Each district is represented by a legislator in the Congress. Legislative process is modeled as a multilateral sequential bargaining game à la Baron and Ferejohn (1989). Some surprising results emerge: bargaining can be welfare-worsening for all participants; legislators may vote for bills that make their constituents worse off; identical industries will receive very different levels of tariff. The results pose a challenge to empirical work, since equilibrium trade policy is a function not only of economic fundamentals but also of political variables at the time of congressional negotiations — some of them random realizations of mixed bargaining strategies.

Publication Type: Article
Additional Information: © 2013 Elsevier B.V. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
Publisher Keywords: Trade policy, Multilateral legislative bargaining, Political economy, Distributive politics
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HF Commerce
J Political Science > JA Political science (General)
Departments: School of Arts & Social Sciences > Economics
URI: https://openaccess.city.ac.uk/id/eprint/23496
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