A Theory of Trade Policy Under Dictatorship and Democratization

66 Pages Posted: 24 Oct 2017

See all articles by Ben Zissimos

Ben Zissimos

Vanderbilt University - College of Arts and Science - Department of Economics

Date Written: September 20, 2017

Abstract

This paper develops a new model of trade policy under dictatorship and democratization. The paper makes two contributions. One is to provide a deeper understanding of the relationship between political institutions and economic efficiency by studying the endogenous interaction between the form of government and trade policy. The paper’s second contribution is to show how a dictatorship can manipulate trade policy to maintain its grip on power in the face of permanent world price shocks, thus opening the door to a re-examination of trade policy responses to technology shocks. The model is used to explain an interesting episode of trade policymaking between 1815 and 1846, during which time Britain substantially liberalized trade while Prussia, on the other side of the grain market, significantly increased protectionism.

Keywords: commitment problem, efficiency, fiscal capacity, institutions, trade policy

JEL Classification: D300, D740, F110, F130, P160

Suggested Citation

Zissimos, Ben, A Theory of Trade Policy Under Dictatorship and Democratization (September 20, 2017). CESifo Working Paper Series No. 6662, Available at SSRN: https://ssrn.com/abstract=3057450

Ben Zissimos (Contact Author)

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States

HOME PAGE: http://www.vanderbilt.edu/econ/cv/ZissimosCV.pdf

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