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Abstract:

cover
CEP Discussion Paper
Reconciling Observed Tariffs and the Median Voter Model
Swati Dhingra
July 2014
Paper No' CEPDP1285:
Full Paper (pdf)

JEL Classification: F11; F13; F59


Tags: median voter; trade policy; heckscher ohlin; terms of trade; wto

Median voter theory applied to trade policy predicts positive tariffs in capital-abundant countries and negative tariffs in labor-abundant countries. Negative tariffs are rare, and this paper reconciles the median voter theory with observed protectionism across countries. By considering large countries, I show the optimal tariff is a sum of the median voter component and a positive in terms of trade component. Positive terms of trade effects raise tariffs in all countries, and can overcome the negative median voter component in labor-abundant countries. Testing the tariff prediction with cross-section and panel data from the 1990s, I show the median voter component is negative in labor-abundant countries and positive in capital-abundant countries. As expected, terms of trade effects raise tariffs across all countries and are stronger among non-members of the WTO.

This paper has been published as:
Reconciling observed tariffs and the median voter model, Swati Dhingra, Economics & Politics, Volume 26, Issue3, November 2014