Economies of scale and trade policy: The median voter model revisited

Daron O. Djerdjian

International Review of Economics & Finance, 2009, vol. 18, issue 3, 479-487

Abstract: Why do some political economy models perform so poorly in predicting actual trade policy? Do scale economies provide the missing puzzle to our understanding of the anti-trade bias? By integrating economies of scale in production, this paper theoretically reinstates the median voter model as in Mayer [Mayer, W. (1984). Endogenous tariff formation. The American Economic Review, 74, 970-985] as a suitable political economy model in predicting trade policy. The modified model generates the scope for the anti-trade bias and predicts that sometimes economic, rather than political, considerations may lead to restrictive trade.

Keywords: Trade; policy; Anti-trade; bias; Scale; economies; Welfare; Median; voter (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:18:y:2009:i:3:p:479-487

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