Reconciling observed tariffs and the median voter model

Dhingra, Swati (2014) Reconciling observed tariffs and the median voter model. Economics & Politics, 26 (3). pp. 483-504.

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Abstract

Median voter theory applied to trade policy predicts positive tariffs in capital-abundant countries and negative tariffs in labor-abundant countries. Negative tariffs are rare, and this paper reconciles the median voter theory with observed protectionism across countries. By considering large countries, I show the optimal tariff is a sum of the median voter component and a positive term of trade component. Positive terms of trade effects raise tariffs in all countries, and can overcome the negative median voter component in labor-abundant countries. Testing the tariff prediction with cross-section and panel data from the 1990s, I show the median voter component is negative in labor-abundant countries and positive in capital-abundant countries. As expected, terms of trade effects raise tariffs across all countries and are stronger among nonmembers of the WTO.

Item Type:	Article
Official URL:	http://onlinelibrary.wiley.com/
Additional Information:	© 2014 John Wiley & Sons Ltd
Library of Congress subject classification:	H Social Sciences > HB Economic Theory
Sets:	Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited:	27 Aug 2014 09:26
URL:	http://eprints.lse.ac.uk/59227/

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