DP5698 Democracy and Protectionism

Author(s): Kevin H. O Rourke , Alan M. Taylor

Publication Date: May 2006

Keyword(s): tariffs , factor endowments , Heckscher-Ohlin trade theory , Stolper-Samuelson theorem

JEL(s): F11 , F13 , N70

Programme Areas: International Trade and Regional Economics

Initiatives: Economic History

Link to this Page: www.cepr.org/pubs/dps/DP5698.asp

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.