Trade policy formation when geography matters for specialisation

Susanna Thede

No 200519, Working Papers from School of Economics, University College Dublin

Abstract: In this paper, trade policy formation is incorporated into an economic geography model. The political setup used is a modified version of that introduced by Grossman and Helpman (1994) in which policy makers may be influenced by lobbying contributions. On the basis of the underlying trade framework, lobbying activity is performed in benefit of capital interests. Optimal policy outcomes indicate that the largest countries and countries that are disadvantaged by trade regulation favour trade liberalisation. Moreover, the optimal domestic policy is more open to trade when the local and global competition facing domestic firms is less fierce, the welfare dependency on manufacturing imports is larger and when there is a more intense preference for variety in consumption. It is shown that lobbying influence on policy is increasing in the concentration of capital ownership in the population. It is also revealed that, in the cases when domestic special and general interests do not coincide, lobbying activity is performed to liberalise trade. In addition, this actually implies that the presence of lobbying influence on policy raises the long-run national welfare.

Keywords: Economic geography; International specialisation; National welfare; Lobbying contributions; Market access reciprocity; Commercial policy; Economic geography; International division of labor; Lobbying; Free trade (search for similar items in EconPapers)
JEL-codes: D72 F12 F13 (search for similar items in EconPapers)
Date: 2005-11
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10197/1792 First version, 2005 (application/pdf)

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:ucn:wpaper:200519

Access Statistics for this paper

More papers in Working Papers from School of Economics, University College Dublin Contact information at EDIRC.
Bibliographic data for series maintained by Nicolas Clifton ().