Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation

Xenia Matschke and Shane Sherlund ()

No 2004-36, Working papers from University of Connecticut, Department of Economics

Abstract: Some recent empirical studies, motivated by Grossman and Helpman's (1994) "protection for sale" model, suggest that very few factors (none of them labor-related) 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 protection-for-sale model if the trade union of a sector lobbies but capital owners do not, because union workers collect part of the protection rents; 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 indeed play important roles in the determination of U.S. trade policy.

Keywords: Trade protection; protection for sale; labor market (search for similar items in EconPapers)
JEL-codes: F13 F16 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2004-11, Revised 2005-05
New Economics Papers: this item is included in nep-lab
Note: We thank the editor David Card and two anonymous referees for helpful comments that greatly improved this paper. We also thank Scott Taylor for his valuable comments and advice and Kishore Gawande, Thomas Osang and Daniel Trefler for providing data. We are grateful to Bob Baldwin, Kishore Gawande, Bruce Hansen, Phil McCalman, Thomas Osang, Bob Staiger, Gautam Tripathi and participants at numerous seminars for helpful comments and suggestions. Ellen Dykes and Jonas Robison are thanked for their help with editing. Xenia Matschke gratefully acknowledges financial support from a Deutsche Forschungsgemeinschaft research fellowship. This paper represents the views of the authors and does not necessarily represent the views of the Federal Reserve System, its members, or its staff.
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Citations: View citations in EconPapers (16)

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https://media.economics.uconn.edu/working/2004-36r.pdf Full text (revised version) (application/pdf)
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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 (2003)
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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