Trade and the Political Economy of Redistribution

Gonzague Vannoorenberghe and Eckhard Janeba

No 4062, CESifo Working Paper Series from CESifo

Abstract: This paper analyzes the effects of trade liberalisation on the political support for policies that redistribute income between workers in different sectors. We allow for worker heterogeneity and imperfect mobility of workers across sectors, giving rise to a trade-off between redistribution and the inefficiency of the labor allocation. We compare two environments, autarky and small open economy, and present three main findings. First, redistributive policies are more “likely” to arise in a small open than in a closed economy. Second, if a redistributive policy is adopted in both situations, its nominal level is higher in autarky than in the small open economy. Third, even though voters choose redistributive policies with lower nominal value in open economies, the actual extent of redistribution in equilibrium is larger in the open than in the closed economy. We discuss our results in the context of the debate about the effects of globalisation on government activity.

Keywords: international trade; redistribution; political economy; factor mobility (search for similar items in EconPapers)
JEL-codes: F10 H20 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Trade and the political economy of redistribution (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_4062

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