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Adjustment, Ambiguity, and Policy Interventions

Adjustment, Ambiguity, and Policy Interventions. A Political Approach to the Domestic Politics of Trade. Mark R. Brawley Dept. of Political Science. Politics and Trade. Current interpretations based on general equilibrium models Interests depicted as: exclusive consistent

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Adjustment, Ambiguity, and Policy Interventions

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  1. Adjustment, Ambiguity, and Policy Interventions A Political Approach to the Domestic Politics of Trade Mark R. Brawley Dept. of Political Science

  2. Politics and Trade • Current interpretations based on general equilibrium models • Interests depicted as: • exclusive • consistent • Political parties presented as passive receptacles of interests • Cleavages shift more often, more rapidly than these predict

  3. Politics and Trade: Ambiguity • Why would preferences shift? • Ambiguity arises from relaxing the general equilibrium condition • Preferences then turn on expected income (i.e. trade shapes both rates of return and employment opportunities) • For select groups, trade moves these in opposite directions

  4. Observing the cleavage... Abundant Factor Intensive Sector Scarce Factor Intensive Sector Abundant Factors Scarce Factors

  5. The Stolper-Samuelson View Abundant Factor Intensive Sector Scarce Factor Intensive Sector Free Trade Free Trade Abundant Factors Protection Protection Scarce Factors

  6. The Sector-Specific Perspective Abundant Factor Intensive Sector Scarce Factor Intensive Sector Free Trade Protection Abundant Factors Free Trade Protection Scarce Factors

  7. Where do we look for swings? Abundant Factor Intensive Sector Scarce Factor Intensive Sector Free Trade ? Abundant Factors ? Protection Scarce Factors

  8. Cleavages in the DMM Model Specific to abundant- factor intensive sectors Specific to scarce- factor intensive sectors Mobile across sectors free trade free trade protection Abundant Factors ambiguous ambiguous protection Scarce Factors

  9. Domestic Policy Interventions • Interventions in adjustment can reduce ambiguity (e.g. unemployment benefits, “matching,” and sector’s “break-up” rates) • Interventions tilt swing groups’ preferences

  10. Cleavages in the DMM Model Specific to abundant- factor intensive sectors Specific to scarce- factor intensive sectors Mobile across sectors free trade free trade protection Abundant Factors ambiguous ambiguous protection Scarce Factors

  11. Advantages of this Approach • Politicians can use trade policy as a tool in their competition • Cleavages are fluid • Domestic and foreign policies are integrated in one model • Better equipped to address questions about politics

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