Reconciling observed tariffs and the median voter model

Dhingra, Swati (2014) Reconciling observed tariffs and the median voter model. CEP Discussion Papers (CEPDP1285). Centre for Economic Performance, London School of Economics and Political Science, 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
Sets:	Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited:	28 Nov 2014 15:03
Last Modified:	20 Oct 2020 06:24
Funders:	Economic and Social Research Council
URI:	http://eprints.lse.ac.uk/id/eprint/60354

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