Identity Politics and Trade Policy

53 Pages Posted: 11 Dec 2018

See all articles by Gene M. Grossman

Gene M. Grossman

Princeton University - Princeton School of Public and International Affairs; Princeton University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Elhanan Helpman

Harvard University

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Date Written: December 2018

Abstract

We characterize trade policies that result from political competition when assessments of well-being include both material and psychosocial components. The material component reflects, as usual, satisfaction from consumption. Borrowing from social identity theory, we take the psychosocial component as combining the pride and self-esteem an individual draws from the status of groups with which she identifies and a dissonance cost she bears from identifying with those that are different from herself. In this framework, changes in social identification patterns that may result, for example, from increased income inequality or heightened racial and ethnic tensions, lead to pronounced changes in trade policy. We analyze the nature of these policy changes.

Keywords: political economy, populism, protectionism, social identity, tariff formation

JEL Classification: D78, F13

Suggested Citation

Grossman, Gene M. and Helpman, Elhanan, Identity Politics and Trade Policy (December 2018). CEPR Discussion Paper No. DP13367, Available at SSRN: https://ssrn.com/abstract=3298777

Gene M. Grossman (Contact Author)

Princeton University - Princeton School of Public and International Affairs ( email )

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Elhanan Helpman

Harvard University ( email )

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