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Economic Crises and Trade Policy Competition

86 Pages Posted: 9 Jul 2015  

Cameron Ballard-Rosa

UNC, Chapel Hill

Allison Carnegie

Columbia University

Nikhar Gaikwad

Columbia University - Department of Political Science

Date Written: July 8, 2015

Abstract

How do crises affect trade policy? We reconcile starkly diverging accounts in the literature by showing that economic adversity generates endogenous incentives not only for protection, but also for liberalization. We first develop formally the mechanisms by which two features of shocks - intensity and duration - influence the resources and political strategies of distressed firms. Our central insight is that policy adjustments to resuscitate afflicted industries typically generate "knock-on" effects on the profitability and political maneuverings of other firms in the economy. We incorporate these countervailing pressures in our analysis of trade policy competition. In the wake of crises, protection initially increases when impacted firms lobby for assistance, but then decreases as industries run low on resources to expend on lobbying and as firms in other industries mobilize to counter-lobby. We test our theoretical predictions using sub-national and cross-national data and present real-world illustrations to highlight the mechanisms driving our results.

Keywords: economic crises, trade policy, lobbying, business-state relations

JEL Classification: F1

Suggested Citation

Ballard-Rosa, Cameron and Carnegie, Allison and Gaikwad, Nikhar, Economic Crises and Trade Policy Competition (July 8, 2015). Available at SSRN: https://ssrn.com/abstract=2628311 or http://dx.doi.org/10.2139/ssrn.2628311

Cameron Ballard-Rosa

UNC, Chapel Hill ( email )

358 Hamilton Hall
Campus Box 3265
Chapel Hill, NC NC 27599
United States

Allison Carnegie (Contact Author)

Columbia University ( email )

1331 International Affairs Bldg.
420 W. 118th Street
New York, NY 10027
United States

Nikhar Gaikwad

Columbia University - Department of Political Science ( email )

7th Floor, International Affairs Bldg.
420 W. 118th Street
New York, NY 10027
United States

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