Commercial Policy with Altruistic Voters

39 Pages Posted: 21 Oct 2000 Last revised: 5 Oct 2001

See all articles by Julio J. Rotemberg

Julio J. Rotemberg

Harvard University, Business, Government and the International Economy Unit (deceased); National Bureau of Economic Research (NBER) (deceased)

Multiple version iconThere are 2 versions of this paper

Date Written: October 2000

Abstract

This paper considers a specific factor model with two sectors in which agents are altruistic towards domestic residents. I show that, even if the degree of altruism is small, direct democracy leads to commercial policies that are biased against trade as long as the mobile factor is unbiased in the sense of Jones and Ruffin (1977) and the income of the owners of the factor which is specific to the import competing sector is lower than the income of the owners of the other specific factor. Tariffs may be preferred to subsidies by the median voter if subsidies require that beneficiaries spend a fixed cost to demonstrate that they are entitled to these subsidies and there is heterogeneity in the size of producers. Lastly, I construct a model of indirect democracy where legislators can receive campaign contributions from potential lobbyists. Even if campaign contributions are positive in equilibrium, the tariffs that emerge from votes taken after lobbying can represent the wishes of the median voter. In this model, campaign contributions do not buy votes. Instead, consistent with what is claimed in the qualitative literature, they buy access to legislators' time. The model is also consistent with the evidence showing that campaign contributions and lobbying activity are directed mainly at legislators who already agree with their contributors and their lobbyists.

Suggested Citation

Rotemberg, Julio J., Commercial Policy with Altruistic Voters (October 2000). NBER Working Paper No. w7984. Available at SSRN: https://ssrn.com/abstract=246886

Julio J. Rotemberg (Contact Author)

Harvard University, Business, Government and the International Economy Unit (deceased) ( email )

Cambridge, MA
United States
617-495-1015 (Phone)
617-496-5994 (Fax)

National Bureau of Economic Research (NBER) (deceased)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
21
Abstract Views
1,564
PlumX Metrics