Endogenous trade policy: Political struggle in the growth process

This paper develops a dynamic theory that accounts for the evolution of trade policy, underlying internal class conflicts, and output growth performance. Analysis of political responses to the distributional effects of international trade reveals that economies with a comparative advantage in manufacturing may reach a developed stage through the ebb and flow of protectionism. This nonmonotonic evolution of trade policy is consistent with the historical experience of Western Europe over the last few centuries.

Research highlights▶ There is a dynamic interaction between trade policy and economic growth. ▶ Trade policy may evolve nonmonotonically in the growth process. ▶ Economic growth causes class conflict by affecting individuals’ policy preferences.