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 con‡icts, and output growth performance over the last few centuries. By analyzing political responses to the distributional e¤ects of international trade, it …nds a prominent interaction between trade policy and the pattern of economic development, and also a signi…cant role for trade liberalization in economic take-o¤. Consistent with historical evidence for Western Europe, land-scarce economies reach a developed stage through the ebb and ‡ow of liberalism. In contrast, land-abundant countries tend to stagnate because of landlords’ opposition to industrialization. Keywords: Trade Policy, Growth, Class Con‡ict. JEL Classi…cation: F10, F13, F43, O11, O40. Institute of Social and Economic Research, Osaka University, 6-1 Mihogaoka, Ibaraki, Osaka 567-0047, Japan; E-mail: [email protected] I am grateful to Oded Galor, Wolfgang Keller, Pravin Krishna, Omar Licandro, and seminar participants at Brown University, the European University Institute, Kobe University, the National Graduate Institute for Policy Studies, Osaka University, and the University of Tokyo for useful comments and encouragement. In addition, I wish to thank Daniel Mejia and Je¤rey G.Williamson for supplying data. This research is supported by a JSPS Grant-in-Aid for Scienti…c Research (No. 18830036).