The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Trade Policy, Political Economy of

  • Devashish Mitra
Reference work entry


This area of research tries, through the introduction of politics in economic models, to explain the existence and the extent of anti-trade bias in trade policy. The two main approaches, namely, the median-voter approach and the special-interest approach are surveyed. Certain applications of these approaches to policy issues, such as trade agreements, the issue of reciprocity versus unilateralism in trade policy, regionalism versus multilateralism, hysteresis in trade policy and the choice of policy instruments, are discussed. Finally, the empirical literature on the political economy of trade policy is surveyed. The new literature that employs a more ‘structural’ approach is emphasized.


Congestion problem Cournot oligopoly Customs unions Deadweight loss Free trade Free trade areas Free-rider problem Heckscher–Ohlin trade theory Hysteresis in trade policy Intermediate goods International trade Lobby formation Lobbying Majority rule Median voter model Monopolistic competition Multilateralism in trade policy Non-tariff barriers Optimal obfuscation principle Political competition Political economy Political support function Political-contributions model Progressive and regressive taxation Proportional representation Protection Reciprocity in trade policy Regional and preferential trade agreements Risk sharing Single-peaked preferences Special-interest politics Specific-factors trade theory Tariff-formation function Tariffs Tariffs vs. subsidies Terms of trade Trade agreements Trade policy, political economy of Trade-diverting vs. trade-creating bilateral agreements Unilateralism in trade policy World Trade Organization 

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Devashish Mitra
    • 1
  1. 1.