Why is Trade Reform So Unpopular?

Raquel Fernandez and Dani Rodrik

No 391, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Despite the well known gains from trade, trade liberalization is one of the most politically contentious actions that a government can undertake. We propose and formalize a new explanation of this unpopularity. The explanation is based on uncertainty and is complementary to the usual explanations: many individuals will simply not know how they will fare under trade reform, and this can reduce support for a reform which would otherwise have been popular, even in the absence of risk aversion. We show that reforms that would have received adequate popular support ex post (i.e. that once enacted will last) may fail to carry the day ex ante because of uncertainty regarding the distribution of gains and losses. Moreover, the role of uncertainty in determining the outcomes is not symmetric, in that reforms which are initially rejected will continue to be so in the future while reforms that are initially accepted may find themselves reversed over time. We discuss empirical illustrations drawn from the experiences of South Korea, Chile and Turkey to provide support for the new explanation.

Keywords: Distribution Of Gains; Trade Liberalization; Uncertainty (search for similar items in EconPapers)
Date: 1990-03
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=391 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:391

Ordering information: This working paper can be ordered from
http://www.cepr.org/ ... pers/dp.php?dpno=391

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().