American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
A Political-Economy Theory of Trade Agreements
American Economic Review
vol. 97,
no. 4, September 2007
(pp. 1374–1406)
Abstract
We present a model where trade agreements are motivated by the desire of governments to commit vis-à-vis domestic lobbies, in addition to standard terms-of-trade externalities. The model predicts that trade liberalization is deeper when capital is more mobile across sectors, and when governments are more politically motivated (provided domestic-commitment motives are strong enough). The model also provides a new rationale for the use of tariff ceilings. In a fully dynamic specification of the model, tariffs are reduced in two stages: an immediate cut and a subsequent gradual reduction, with the speed of liberalization increasing in the degree of capital mobility. (JEL D72, F13)Citation
Maggi, Giovanni, and Andrés Rodríguez-Clare. 2007. "A Political-Economy Theory of Trade Agreements." American Economic Review, 97 (4): 1374–1406. DOI: 10.1257/aer.97.4.1374JEL Classification
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- F13 Trade Policy; International Trade Organizations