Abstract
When governments meet in the international arena, their actions reflect the political situations at home. Previous studies of trade relations have focused on governments that are immune from political pressures and that act as benevolent servants of the public interest. Here we introduce domestic politics into the analysis of international economic relations. We study the interactions between national leaders who are concerned both with providing a high standard of living to the general electorate and collecting campaign contributions from special interest groups. Our analysis sheds light on the determinants of the structure of protection in non-cooperative and cooperative policy equilibria.
Keywords
- Trade Policy
- Foreign Government
- Campaign Contribution
- Export Subsidy
- Lobby Group
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.
First published in “Journal of Political Economy”, 1995, and reprinted here with the permission of University of Chicago Press, Chicago, IL (grant no. 33955).
We thank the National Science Foundation and the U.S.-Israel Binational Science Foundation for financial support. Grossman also thanks the John S. Guggenheim Memorial Foundation, the Sumitomo Bank Fund, the Daiwa Bank Fund, and the Center of International Studies at Princeton University. A comment by Ernst Mohr is gratefully acknowledged.
This is a preview of subscription content, access via your institution.
Buying options
Preview
Unable to display preview. Download preview PDF.
References
Baldwin, Robert E. (1985), The Political Economy of U.S. Import Policy. MIT Press, Cambridge, Mass.
Bernheim, B. Douglas and Michael D. Whinston (February 1986), “Menu Auctions, Resource Allocation, and Economic Influence”, Quarterly Journal of Economics 101, pp. 1–31.
Binmore, Ken, Ariel Rubinstein and Asher Wolinsky (Summer 1986), “The Nash Bargaining Solution in Economic Modeling”, Rand Journal of Economics 17, pp. 176–188.
Brock, William A. and Stephen P. Magee (May 1978), “The Economics of Special Interests: The Case of the Tariff”, American Economic Review 68, pp. 246–250.
Cowhey, Peter F. (1990), “‘States’ and ‘Polities’ in American Foreign Policy”, in: Odell, J.S. and T.D. Willett (eds.): International Trade Policies: Gains from Exchange between Economics and Political Science, The University of Michigan Press, Ann Arbor.
Fershtman, Chaim and Kenneth L. Judd (December 1987), “Equilibrium Incentives in Oligopoly”, American Economic Review 77, pp. 927–940.
Findlay, Ron, and Stanislaw Wellisz (1982), “Endogenous Tariffs, The Political Economy of Trade Restrictions, and Welfare”, in: Bhagwati, J. (ed.): Import Competition and Response, University of Chicago Press.
Grossman, Gene M. and Elhanan Helpman (September 1994), “Protection for Sale”, American Economic Review 84, pp. 833–850.
Hillman, Arye L. (December 1982), “Declining Industries and the Political-Support Motive for Protection”, American Economic Review 72, pp. 1180–1187.
Hillman, Arye L. and Peter Moser (1995), “Trade Liberalization as Politically Optimal Exchange of Market Access”, in: Canzoneri, Matthew et al. (eds.): The New Transatlantic Economy, Cambridge University Press, Cambridge, U.K.
Johnson, Harry G. (1953/54), “Optimal Tariffs and Retaliation”, Review of Economic Studies 21, pp. 142–153.
Katz, Michael L. (Autumn 1991), “Game Playing Agents: Unobservable Contracts as Precommitments”, Rand Journal of Economics 22, pp. 307–328.
Kennan, John and Ray Riezman (February 1988), “Do Big Countries Win Tariff Wars”, International Economic Review 29, pp. 81–85.
Kuga, Kiyoshi (November 1973), “Tariff Retaliation and Policy Equilibrium”, Journal of International Economics 3, pp. 351–366.
Lavergne, Real P. (1983), The Political Economy of U.S. Tariffs: An Empirical Analysis. Academic Press, Toronto.
Long, Ngo Van, and Neil Vousden (February 1991), “Protectionist Responses and Declining Industries”, Journal of International Economics 30, pp. 87–103.
Magee, Stephen P., William A. Brock and Leslie Young (1989), Black Hole Tariffs and Endogenous Policy Formation. The MIT Press, Cambridge, Mass.
Magelby, David B. and Candice J. Nelson (1990), The Money Chase: Congressional Campaign Finance Reform. The Brookings Institution, Washington, DC.
Mayer, Wolfgang (March 1981), “Theoretical Considerations on Negotiated Tariff Adjustments”, Oxford Economic Papers 33, pp. 135–153.
Pelzman, Sam (August 1976), “Toward a More General Theory of Regulation”, Journal of Law and Economics 19, pp. 211–240.
Putnam, Robert (Summer 1988), “Diplomacy and Domestic Policy: The Logic of Two Level Games”, International Organization 43, pp. 427–460.
Reidel, James (May 1977), “Tariff Concessions in the Kennedy Round and the Structure of Protection in West Germany: An Econometric Assessment”, Journal of International Economics 7 pp. 133–144.
Riezman, Ray (January 1982), “Tariff Retaliation from a Strategic Viewpoint”, Southern Journal of Economics 48, pp. 583–593.
Rubinstein, Ariel (January 1982), “Perfect Equilibrium in a Bargaining Model”, Econometrica 50, pp. 97–109.
Snyder Jr., James M. (December 1990), “Campaign Contributions as Investments: The U.S. House of Representatives, 1980–86”, Journal of Political Economy 98, pp. 1195–1227.
Stigler, George J. (Spring 1971), “The Theory of Economic Regulation”, Bell Journal of Economics and Management Science 1, pp. 1–21.
Sutton, John (October 1986), “Non-cooperative Bargaining Theory: An Introduction”, Review of Economic Studies 53, pp. 709–724.
Tosini, Suzanne C. and Edward Tower (1987), “The Textile Bill of 1985: The Determinants of Congressional Voting Patterns”, Public Choice 54, pp. 19–25.
Trefler, Daniel (February 1993), “Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy”, Journal of Political Economy 101, pp. 138–161.
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 1997 Springer-Verlag Berlin — Heidelberg
About this paper
Cite this paper
Grossman, G.M., Helpman, E. (1997). Trade Wars and Trade Talks. In: Razin, A., Vosgerau, HJ. (eds) Trade and Tax Policy, Inflation and Exchange Rates. Studies in International Economics and Institutions. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-60846-9_6
Download citation
DOI: https://doi.org/10.1007/978-3-642-60846-9_6
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-64582-2
Online ISBN: 978-3-642-60846-9
eBook Packages: Springer Book Archive