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Trade Policies as Signals of Private Political Pressure

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  • Hisashi Sawaki

Abstract

The situation of a home government facing political pressure from an exporting industry within its jurisdiction is considered. If a foreign government cannot directly observe such pressure, the home government has an incentive to understate it to induce foreign tariff reductions. In equilibrium, the home government will distort its first‐period trade policy in a direction that the industry does not prefer (i.e. raising the export tax or reducing the export subsidy) in order to reveal the true pressure, as compared with a policy selected under complete information.

Suggested Citation

  • Hisashi Sawaki, 2007. "Trade Policies as Signals of Private Political Pressure," Review of International Economics, Wiley Blackwell, vol. 15(5), pages 878-889, November.
    • Handle: RePEc:bla:reviec:v:15:y:2007:i:5:p:878-889
    DOI: 10.1111/j.1467-9396.2007.00702.x
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    References listed on IDEAS

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    1. Matloob Piracha, 2004. "Export Subsidies and Countervailing Duties Under Asymmetric Information," Studies in Economics 0410, School of Economics, University of Kent.
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    Cited by:

    1. Pei-Cheng Liao, 2014. "Input Prices as Signals of Costs to a Downstream Rival and Customer," The Japanese Economic Review, Japanese Economic Association, vol. 65(3), pages 414-430, September.

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