Publication at Faculty of Social Sciences, Faculty of Mathematics and Physics, Centre for Economic Research and Graduate Education |
2013
Abstract
In democracies, trade policy is the result of interactions among many agents with different agendas. In accordance with this observation, we construct a dynamic model of legislative trade policy-making in the realm of distributive politics.
An economy consists of different sectors, each of which is concentrated in one or more electoral districts. Each district is represented by a legislator in the Congress.
Legislative process is modeled as a multilateral sequential bargaining game a la Baron and Ferejohn (1989). Some surprising results emerge: bargaining can be welfare-worsening for all participants; legislators may vote for bills that make their constituents worse off; identical industries will receive very different levels of tariff.