How Globalization Unravels: A Ricardian Model of Endogenous Trade Policy

Jesús Fernández-Villaverde (), Tomohide Mineyama () and Dongho Song
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Jesús Fernández-Villaverde: University of Pennsylvania
Tomohide Mineyama: International Monetary Fund

PIER Working Paper Archive from Penn Institute for Economic Research, Department of Economics, University of Pennsylvania

Abstract: We study how uneven gains from globalization can endogenously generate protectionism as a political equilibrium. Using U.S. data, we document that regions more exposed to import competition display stronger opposition to globalization, especially among households with little financial wealth, and that firms in trade-exposed sectors sharply increase lobbying expenditures. To interpret these patterns, we develop and quantify a general equilibrium Ricardian model with heterogeneous households, input–output linkages, and endogenous trade policy shaped by voting and lobbying. Distributional shocks reallocate political support among voters, while lobbying propagates through production networks, generating strategic complementarities that sustain protectionism. Calibrated to U.S.–China sectoral data from 1991–2019, the model accounts for rising inequality, declining support for globalization, and key aggregate trends in consumption and trade.

Keywords: Globalization; heterogeneous households; multi-sector; production network; Ricardian trade; voting; political lobbying (search for similar items in EconPapers)
JEL-codes: D57 D58 D63 D72 F1 F2 F4 F6 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2026-04-01
New Economics Papers: this item is included in nep-cdm, nep-dge and nep-pol
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