© 2017 This paper develops a new model of trade policy under dictatorship and democratization. The paper makes two contributions. One is to provide a deeper understanding of the relationship between political institutions and economic efficiency by studying the endogenous interaction between the form of government and trade policy. The paper's second contribution is to show how a dictatorship can manipulate trade policy to maintain its grip on power in the face of permanent world price shocks, thus opening the door to a re-examination of trade policy responses to technology shocks. The model is used to explain an interesting episode of trade policymaking between 1815 and 1846, during which time Britain substantially liberalized trade while Prussia, on the other side of the grain market, significantly increased protectionism.

This paper shows how a world price shock can increase the likelihood that democratization must be used to resolve the threat of revolution. Initially, a ruling elite may be able to use trade policy to maintain political stability. But a world price shock can push the country into a situation where the elite face a commitment problem that only democratization can resolve. Because the world price shock may also reduce average incomes, the model provides a way to understand why the level of national income per capita and democracy may not be positively correlated. The model is also useful for understanding dictatorial regimes� rebuttal of World Bank calls to keep their export markets open in the face of the 2007-08 world food crisis.

We show that, in competition between a developed country and a developing country over environmental standards and taxes, the developing country may have a “second-mover advantage.” in our model, firms do not unanimously prefer lower environmental standard levels. We introduce this feature to an otherwise familiar model of fiscal competition. Four distinct outcomes can be characterized by varying the marginal cost to firms of an environmental externality: (1) the outcome may be efficient; (2) the developing country may be a “pollution haven”—a place to escape excessively high environmental standards in the developed country; (3) the developing country may “undercut” the developed country and attract all firms; (4) the developed country may be a pollution haven.

The GATT/WTO Article XXIV prevents a customs union (CU) from raising its common external tariff. In this paper, we compare CU formation with and without this Article XXIV constraint. We show, in a multi-country oligopoly model, that for a given CU structure, Article XXIV improves world welfare by lowering trade barriers. However, we also show that Article XXIV has a composition effect on CU formation: it affects the endogenous choice of CUs. By encouraging more symmetric CUs, Article XXIV causes more trade to be subject to trade barriers. As a result, Article XXIV may be 'bad' for world welfare. © 2012 Elsevier B.V.

This paper shows how distance may be used to coordinate on a unique equilibrium in which trade agreements are regional. Trade agreement formation is modeled as coalition formation. In a standard trade model with no distance between countries a familiar problem of coordination failure occurs, giving rise to multiple equilibria; any one of many possible trade agreements can form. With distance between countries, regional trade agreements generate larger rent-shifting effects than nonregional agreements. Countries use these effects to coordinate on a unique equilibrium. © 2011 Blackwell Publishing Ltd.

This paper identifies a new terms-of-trade externality that is exercised through tariff setting. A North-South model of international trade is introduced in which the number of countries in each region can be varied. As the number of countries in one region is increased, each government there competes more aggressively with the others in its region, by lowering its tariff, to attract imports from the other region. In doing so, all countries in a region exert a negative terms-of-trade externality on each other, collectively undermining their own terms of trade and welfare. This externality can increase efficiency if the numbers of countries in both regions are increased simultaneously. © 2009 Elsevier B.V. All rights reserved.

In a classic model of tax competition, this paper shows that the level of public good provision and taxation in a decentralized equilibrium can be efficient or inefficient with either too much, or too little public good provision. The key is whether there exists a unilateral incentive to deviate from the efficient state and, if so, whether this entails raising or lowering taxes. A priori, there is no reason to suppose the incentive is in either one direction or the other.

This paper sets out a proposal for a new world body on the environment aimed at improving environmental quality through bargained deals on the environment. Just as the GATT/WTO tries to liberalise trade in goods and services by removing border impediments on trade through negotiated exchanges of trade policy concessions, so we argue that a World Environmental Organization (WEO) should have as its principal focus removing impediments to bargaining (and trades) on the global environment. Exchanges of commitments on forest cover, maintenance of coral reefs, species management, biodiversity protection and other environmental concessions in return for cash, policy change (trade policy changes, for instance) and other considerations could all fall under the bargaining umbrella of WEO. If such bargains were struck, the result would be improved environmental quality and transfers of resources for developmental purposes to poorer countries who, in the main, are custodians of these assets. This paper sets out our ideas on how a new global environmental bargaining entity, a World Environmental Organisation, or WEO, might work. Our starting point is the relative absence of mechanisms which achieve internalisation of global environmental externalities, against a background of repeated attempts to define a global regime based on the principles inherited from Agenda 21. The outcome of present arrangements we see as a patchwork quilt of lowest common denominator arrangements from around 200 MEAs worldwide. These are limited in scope and often minimal in impact. We argue for the need for an international agency to facilitate deals between countries and entities within countries so as to support and underpin internalisation. We see a WEO as a facilitator of international deals on the environment which aim to raise environmental quality. In the past, concluding such deals have faced a range of impediments; ambiguous property rights, free riding, time inconsistency, verification, and incomplete financial intermediation. We see a WEO as striving for improvements in all these areas so as to facilitate environmental quality improving deals both globally and across countries. A global environmental regime based on mechanism design rather than principles is what we advocate, since the objective of internalising environmental externalities seems to be clearly agreed. No wide-ranging proposal such as ours will be adopted overnight, and we recognise many impediments to it which we discuss in the text. But if global environmental quality worsens in the years ahead, as many fear, perhaps these ideas will play a role in providing intellectual underpinnings, to institutional change in this area.

A new method is developed for allocating the changing use of skills among final demand growth, trade and technological change. In a multi-sector framework the skills content of intermediate and capital goods purchased is captured through input-output data. Technological change is measured through the changing use of labour, within the sector and in its purchased inputs. Three skill levels are identified from detailed occupations. Domestic demand growth (employment-creating) and technological change (labour-saving) both show marked skill-bias. The effects of trade are small. Most strikingly, the services sector generates high-skilled even more than low-skilled jobs, and new employment through supply chains.