Summary of Political Economy of Trade Policies- Baldwin

Summary of Political Economy of Trade Policies- Baldwin -...

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Summary of “Political Economy of Trade Policies” of Robert Baldwin March 25, 2008 Although most economics models advocate free trade, there is a lot of protectionism in the real world Two broad approaches: o 1) Economic Self-Interest Approach : considers effects on one’s real income H-O Model Capitalists vote for free trade and workers vote for protectionist policy Costless redistribution: Capitalists earn a lot from free trade and can compensate workers for their losses and still have profit left over Real world: Costly Redistribution- incentives against free trade Cost voting: if loss from policy is less than loss from voting people may not vote Money, votes, coalition politics: effects of lobbying-
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Unformatted text preview: pressuring government to enact certain policies • Triggers of self-interested action: greater weight placed on loss than gain of same amount • Prisoners dilemma: protectionist policy always dominant strategy but higher gains come if both countries cooperate o 2) Social Concerns Approach : considers effects on welfare of certain social and economic groups Concern for changing distribution of income: political concerns not really altruistic, increase standard of living of certain groups Trade policy as foreign policy: hegemonic states adopt liberal trade policy to influence foreign policy • Example: Cold War...
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