DO LABOR ISSUES MATTER IN THE DETERMINATION OF U.S. TRADE POLICY? AN EMPIRICAL REEVALUATION

Xenia Matschke and Shane Sherlund ()

Santa Cruz Department of Economics, Working Paper Series from Department of Economics, UC Santa Cruz

Abstract: Some recent empirical studies, motivated by Grossman and Helpman’s (1994) well-known “Protection for Sale” model, suggest that very few factors (none of them laborrelated) determine trade protection. This paper reexamines the roles that labor issues play in the determination of trade policy. We introduce collective bargaining, differences in labor mobility across industries, and trade union lobbying into the protection for sale model and show that the equilibrium protection rate in our model depends upon these labor market variables. In particular, our model predicts that trade protection is structurally higher than in the original Grossman-Helpman model if the trade union of a sector lobbies but capital owners do not, because union workers collect part of the protection rents. On the other hand, equilibrium protection is lower if capital owners lobby but the trade union does not, because part of the protection rents is dissipated to workers. Using data from U.S. manufacturing, we find that collective bargaining, differences in labor mobility across industries, and trade union lobbying do indeed play important roles in the determination of U.S. trade policy.

Keywords: Tariffs; trade protection; protection for sale; labor market (search for similar items in EconPapers)
Date: 2003-11-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation (2006)
Working Paper: Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation (2005)
Working Paper: DO LABOR ISSUES MATTER IN THE DETERMINATION OF U.S. TRADE POLICY? AN EMPIRICAL REEVALUATION (2003)
Working Paper: DO LABOR ISSUES MATTER IN THE DETERMINATION OF U.S. TRADE POLICY? AN EMPIRICAL REEVALUATION (2003)
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