Inequality and endogenous trade policy outcomes

Nuno Limão and Arvind Panagariya

Chapter 8 in Policy Externalities and International Trade Agreements, 2018, pp 237-254 from World Scientific Publishing Co. Pte. Ltd.

Abstract: An enduring puzzle in international economics is why trade interventions are biased in favor of import-competing rather than export sectors and therefore restrict trade. In this paper, we show that if the government’s objective reflects a concern for inequality then trade policy generally exhibits an anti-trade bias. Importantly, under neutral assumptions, the mechanism that we analyze generates the anti-trade bias independently of whether factors are specific or mobile across sectors. The mechanism also generates an anti-trade bias between large countries even after they sign reciprocal trade agreements that eliminate any terms-of-trade motivation for the use of trade protection.

Keywords: Trade; International Trade; WTO; World Trade Organization; Investment; Globalization; Externality; Policy; Cooperation (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2018
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Journal Article: Inequality and endogenous trade policy outcomes (2007)
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