Trade policies as signals of private political pressure

Hisashi Sawaki

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Abstract

The situation of a home government facing political pressure from an exporting industry within its jurisdiction is considered. If a foreign government cannot directly observe such pressure, the home government has an incentive to understate it to induce foreign tariff reductions. In equilibrium, the home government will distort its first-period trade policy in a direction that the industry does not prefer (i.e. raising the export tax or reducing the export subsidy) in order to reveal the true pressure, as compared with a policy selected under complete information.

Original languageEnglish
Pages (from-to)878-889
Number of pages12
JournalReview of International Economics
Volume15
Issue number5
DOIs
Publication statusPublished - Nov 2007
Externally publishedYes

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ASJC Scopus subject areas

  • Geography, Planning and Development
  • Development

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