DP5698 | Democracy and Protectionism

Publication Date

30/05/2006

JEL Code(s)

Keyword(s)

Programme Area(s)

Network(s)

Abstract

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.