Autocracy, democracy and trade policy

Sebastian Galiani and Gustavo Torrens

Journal of International Economics, 2014, vol. 93, issue 1, 173-193

Abstract: This paper develops a politico-economic model for use in studying the role of intra-elite conflict in the simultaneous determination of a country's political regime, trade policy and income-tax-based redistribution scheme. Three socioeconomic groups are involved: two elite groups and workers, whose preferences regarding trade policy and income taxation are derived from a simple open-economy model. The critical point is that income taxation induces a rich–poor/elite–workers political cleavage, while trade policy opens the door to intra-elite conflict. In this model, when there is no intra-elite conflict, changes in trade policy are associated with political transitions. Coups (democratizations) open up the economy if and only if both elite groups are pro-free-trade (protectionist). However, in the presence of intra-elite conflict, autocracies respond to popular revolts by changing trade policy and reallocating political power within the elite (to the elite group with the same trade policy preference as the workers) rather than offering to democratize the country. The change in trade policy is credible because the elite group with the same trade policy preference as the workers controls the autocracy. Moreover, in the presence of intra-elite conflict, coups tend to result in the maintenance of the existing trade policy unless popular demands are extremely radical and/or the elite group with the same trade policy preference as the workers is exceptionally weak.

Keywords: Trade policy; Democratization; Coups; Intra-elite conflict (search for similar items in EconPapers)
JEL-codes: D72 D78 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Working Paper: Autocracy, Democracy and Trade Policy (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:93:y:2014:i:1:p:173-193

DOI: 10.1016/j.jinteco.2013.11.011

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