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Reconciling observed tariffs and the median voter model

Dhingra, Swati ORCID: 0000-0001-5468-3415 (2014) Reconciling observed tariffs and the median voter model. CEP Discussion Papers (CEPDP1285). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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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 in terms 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 non-members of the WTO.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk/_new/publications/series.asp?...
Additional Information: © 2014 The Author
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HD Industries. Land use. Labor
H Social Sciences > HF Commerce
J Political Science > JZ International relations
JEL classification: F - International Economics > F1 - Trade > F11 - Neoclassical Models of Trade
F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
F - International Economics > F5 - International Relations and International Political Economy > F59 - International Relations and International Political Economy: Other
Date Deposited: 28 Nov 2014 15:03
Last Modified: 01 Nov 2024 04:55
Funders: Economic and Social Research Council
URI: http://eprints.lse.ac.uk/id/eprint/60354

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