Heterogeneous Districts, Interests, and Trade Policy

Abstract

Congressional districts are political entities with heterogeneous trade policy preferences due to their diverse economic structures. Representation of these interests in Congress is a crucial aspect of trade policymaking that is missing in canonical political economy models of trade. In this paper, we underscore the influence of districts by developing a political economy model of trade with region-specific factors. Using 2002 data from U.S. Congressional Districts, we first characterize the unobserved district-level demand for protection. Extending the model beyond the small country assumption to account for export interests as a force countering protection, we develop a model of national tariff-setting. The model predictions are used to estimate the welfare weights implied by tariff and non-tariff measures enacted nationally. Our supply-side explanation for trade policy, while complementing Grossman and Helpman (1994), reveals district and industry-level patterns of winners and losers, central to understanding the political consequences of trade and the backlash against globalization.

Keywords: Trade Policy, Political Economy, Districts, Tariffs, NTMs, Legislature

JEL Classification: F13, F14, D72, D78