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.
- Trade Policy
- Foreign Government
- Campaign Contribution
- Export Subsidy
- Lobby Group
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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.
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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
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