Evidence from a New Tariff-line Dataset
Political Economy Seminar with In Song Kim (MIT)
Do democracies face more or less political pressures to protect certain industries than non-democracies? How important are a trading partner’s political institutions in overcoming time inconsistency problems? While domestic political institutions and distributional conflicts across disparate industries have long been central to theories of international political economy, few empirical studies examine liberalization trajectories across industries, let alone countries’ partner-specific policy differences. We collect 5.2 billion observations of industry-level applied tariff rates that 136 countries differentially apply to their trading partners, incorporating the universe of preferential rates and Generalized System of Preferences (GSP) at the tariff line level. To incorporate the rich structure and volume of our data, we develop a Bayesian multilevel estimator that distinguishes the effects of political institutions across industries and trading partners. We find that pairs of democracies achieve greater tariff reductions in bilateral FTAs than dyads with a democracy and a non-democracy. However, we show that difference between democratic and mixed pairs is due in large part to shallower concessions granted by non-democratic importers vis-á-vis democratic partners, but not vice-versa. We also find evidence for protective demands from agricultural sector that democracies face. Our findings add nuance to the claim that democratic political institutions facilitate unilateral and bilateral trade liberalization.
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