Trade Politics: A Heckscher-Ohlin-Downs Framework
29 Pages Posted: 6 Jun 2006
Date Written: April 2006
In this study, we show that the unique Nash equilibrium of a political competition model between two parties in a Heckscher-Ohlin setting entails differentiated trade politics, with one party proposing a high tariff, and the other, a low one. The basic departure from a median voter model is the introduction of campaign contributions which influence the vote of a group of uninformed voters. Parties are Downsian, not ideological, yet campaign contributions create an asymmetry between them. Thus, the heterogeneous trade platforms in a two-party system are endogenous. One party is labeled as a promoter of protectionism, whereas the other is labeled as pro-trade.
Keywords: Tariffs, Political Competition, Campaign Contribution, Median Voter
JEL Classification: F13, P16
Suggested Citation: Suggested Citation