Foreign influence and welfare

• 成果类型: Article
• 署名作者: Antras, Pot; Padro i Miquel, Gerard
• 署名单位: Harvard University; University of London; London School Economics & Political Science
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2011.03.011
• 发表日期: 2011
• 页码: 135-148
• 关键词: Foreign influence; externalities; welfare; Electoral competition; Balance of power; import tariffs

摘要

How do foreign interests influence policy? How are trade policies and the viability of trade agreements affected? What are the welfare implications of such foreign influence? In this paper we develop a model of foreign influence and apply it to the study of optimal tariffs. In a two-country voting model of electoral competition, we allow the incumbent party in each country to take costly actions that probabilistically affect the electoral outcome in the other country. We show that policies end up maximizing a weighted sum of domestic and foreign welfare. Using this formulation we show that foreign influence increases aggregate world welfare when there are no other means of alleviating the externalities that arise from cross-border effects of policies. In contrast, when countries can engage in international agreements, foreign influence can prove harmful as powerful countries may refuse to offer concessions. We also show that power imbalances are particularly detrimental to cooperation when they are positively correlated with economic size. (c) 2011 Elsevier B.V. All rights reserved.