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POLI 243 Lecture 9
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- POLI 243 (POLI)
- Institution
- McGill University (Mcgillu)
POLI 243 Lecture 9 notes
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Lecture 9 - Feb 6th, 2019The Politics of Trade
Aklin, Arias, Deniz, Rosendorff, “Domestic Politics of Trade Policy” unpublished paper, (2016)
Lecture Notes
The Politics of Trade
The Political Consequences of Specialization
- Expanding on our understanding of the consequences of trade
- Last lecture: notion of comparative advantage, why economists consider free trade
mutually beneficial, etc.
- Recall: If free trade is mutually beneficial for two countries, why don’t we see it
happening more often?
- This question was very hard to answer until Heckscher and Ohlin had done their work on
the sources of comparative advantage. (1920’s)
- This opened up the door for others to model the concept of specialization, i.e. the impact
trade has within countries
- How does trade redistribute income?
Extensions of the H-O Model
Stolper-Samuelson Theorem (1941)
- Heckscher and Ohlin made their arguments in the 1920’s
- 1930’s was a period of time wracked by protectionist tariffs.
- At the beginning of the Great Depression, the U.S.’s response was to raise a very
high tariff, which led to retaliation from other countries.
- At the end of the 1930’s, Wolfgang Stolper and Paul Samuelson asked:
- If free trade is beneficial to a country, why would so many people support a protectionist
tariff? (i.e. in a democracy like the US)
- Created a model to figure out what the impact of trade liberalization is
(Stolper-Samuelson Theorem)
Assumes factors of production may move from one application to another with ease, at no cost
- This is a simplifying assumption, to make the model more clear
Specialization would occur rapidly and fully
- In terms of the U.S. in the 1930’s, they were well endowed in capital and land, but not
labour (relatively)
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