ravenhill3e_ch04 - Chapter 4 The Domestic Sources of...

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Chapter 4 The Domestic Sources of Foreign Economic Policies Chapter by Michael J Hiscox John Ravenhill Global Political Economy, 3 rd edition
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Lecture Plan Introduction Policy Preferences Trade, Immigration, Foreign Investment, Exchange Rates The effect of institutions Types of Political Systems, Legislatures and Policy-making Rules, Bureaucratic Agencies Complications to Analysis Information and Ideas, Policy and Issue Linkages, International Bargaining
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Introduction (1) Foreign economic policies encompass: International trade International flows of investment and capital Immigration and emigration Exchange rate for national currency Governments make different choices or decisions in each of these areas – why?
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Introduction (2) Two key domestic explanations of foreign economic policies The policy preferences of different groups in the domestic economy Requires economic analysis Basic assumption: individuals and groups are concerned about how different policy choices affect their incomes Domestic political institutions determine the way these preferences are aggregated or converted into actual government decision Requires political analysis
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Policy Preferences: Trade (1) Heckscher-Ohlin model Differences in factor endowments create differences in comparative advantage Each country tends to export those items whose production requires intensive use of domestically abundant factor Each country tends to import those items whose production requires intensive use of domestically scarce factor
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Policy Preferences: Trade (2) Stolper-Samuelson theorem (1941) Assumption : factors of production are highly mobile between different industries Trade benefits those who own the factors of production that are relatively abundant Trade hurts those who own the factors of production that are relatively scarce Trade creates winners and losers within each country. We expect that Winners would support greater trade openness Losers would be against greater trade openness
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