DP5698 Democracy and Protectionism

Author(s): Kevin Hjortshøj O'Rourke, Alan M. Taylor
Publication Date: May 2006
Keyword(s): factor endowments, Heckscher-Ohlin trade theory, Stolper-Samuelson theorem, tariffs
JEL(s): F11, F13, N70
Programme Areas: International Trade and Regional Economics
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5698

Does democracy encourage free trade? It depends. Broadening the franchise involves transferring power from non-elected elites to the wider population, most of whom will be workers. The Hecksher-Ohlin-Stolper-Samuelson logic says that democratization should lead to more liberal trade policies in countries where workers stand to gain from free trade; and to more protectionist policies in countries where workers will benefit from the imposition of tariffs and quotas. We test and confirm these political economy implications of trade theory hypothesis using data on democracy, factor endowments, and protection in the late nineteenth century.