Reconciling Observed Tariffs and the Median Voter Model

Swati Dhingra

CEP Discussion Papers from Centre for Economic Performance, LSE

Abstract: Median voter theory applied to trade policy predicts positive tariffs in capital-abundant countries and negative tariffs in labor-abundant countries. Negative tariffs are rare, and this paper reconciles the median voter theory with observed protectionism across countries. By considering large countries, I show the optimal tariff is a sum of the median voter component and a positive in terms of trade component. Positive terms of trade effects raise tariffs in all countries, and can overcome the negative median voter component in labor-abundant countries. Testing the tariff prediction with cross-section and panel data from the 1990s, I show the median voter component is negative in labor-abundant countries and positive in capital-abundant countries. As expected, terms of trade effects raise tariffs across all countries and are stronger among non-members of the WTO.

Keywords: Median voter; trade policy; Heckscher Ohlin; terms of trade; WTO (search for similar items in EconPapers)
JEL-codes: F11 F13 F59 (search for similar items in EconPapers)
Date: 2014-07
New Economics Papers: this item is included in nep-int and nep-pol
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Reconciling Observed Tariffs and the Median Voter Model (2014)
Working Paper: Reconciling observed tariffs and the median voter model (2014)
Working Paper: Reconciling observed tariffs and the median voter model (2014)
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