Political institutions and the political economy of trade policy

1
Political institutions and the political economy
of trade policy

• March 30, 2009

2
Trade as an example

• Clear incidence
• Winners and losers
• DWC
• Simple economic implications
• Identity of principal actors
• Preference intensity
• Externalities
• Close relationship to S-P (hence G-H)

3
Adding institutions

• How might institutions translate actor
  preferences into policy?
• Aggregation of preferences
• Internalization of externalities
• Concentration, variable influence
• Bias (positive, negative)
• Different kinds of institutions
• Social, electoral, legislative, etc.

4
Social institutions

• Aggregation Social organization
• Autoworkers or Baptists?
• Farmers or Southerners?
• Plumbers or whites?
• Concentration and bias Voluntary organizations
• Unions, business associations, clubs
• Clear impact on internalization of externalities
• I.e. centralized vs. decentralized unions

5
Electoral institutions

• Cf. Cox centripetal vs. centrifugal
• Aggregation
• Parties strong, weak, centralized, decentralized
• Concentration
• Number of parties, chambers
• Bias
• Disproportionality
• Pivotal regions, groups, parties

6
Legislative institutions

• Aggregation
• Separation of powers with different functional
  constituencies
• Concentration
• Role of majority, opposition
• Bias
• Agenda control
• Privileged branches

7
Bureaucratic institutions

• Aggregation as delegation
• Who are the principals? How does delegation
  affect preference aggregation?
• Concentration
• Capture vs. oversight
• Bias
• Agenda control ? capture, or welfare?

8
On another dimension

• Inter-temporal nature of trade and trade policy
  (and most others)
• Dynamic effects of trade policy
• Changing nature of constituents
• Positive and negative dynamic effects on welfare
• Time-consistency and trade policy
• Time-varying incentives to policymakers, to
  interest groups
• Difficulty of credible commitments

9
Institutions and inter-temporal policymaking

• Institutions and the dynamic effects of trade
  policy
• Do they internalize long-term impact on
  interests, on welfare, on politicians?
• Institutions and inter-temporal commitments
• Do they facilitate, impede inter-temporal trades?