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Identity Politics and Trade Policy
[Economics of Identity]

Author

Listed:
  • Gene M Grossman
  • Elhanan Helpman
Abstract
We characterize trade policies that result from political competition when assessments of well-being include both material and psychosocial components. The material component reflects, as usual, satisfaction from consumption. Borrowing from social identity theory, we take the psychosocial component as combining the pride and self-esteem an individual draws from the status of groups with which she identifies and a dissonance cost she bears from identifying with those that are different from herself. In this framework, changes in social identification patterns that may result, for example, from increased income inequality or heightened class or ethnic tensions, lead to pronounced changes in trade policy. We analyse the nature of these policy changes.

Suggested Citation

  • Gene M Grossman & Elhanan Helpman, 2021. "Identity Politics and Trade Policy [Economics of Identity]," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 88(3), pages 1101-1126.
    • Handle: RePEc:oup:restud:v:88:y:2021:i:3:p:1101-1126.
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    File URL: http://hdl.handle.net/10.1093/restud/rdaa031
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    References listed on IDEAS

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    1. Gary Charness & Matthew Rabin, 2002. "Understanding Social Preferences with Simple Tests," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(3), pages 817-869.
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    3. David Atkin & Eve Colson-Sihra & Moses Shayo, 2021. "How Do We Choose Our Identity? A Revealed Preference Approach Using Food Consumption," Journal of Political Economy, University of Chicago Press, vol. 129(4), pages 1193-1251.
    4. David H. Autor & David Dorn & Gordon H. Hanson, 2013. "The China Syndrome: Local Labor Market Effects of Import Competition in the United States," American Economic Review, American Economic Association, vol. 103(6), pages 2121-2168, October.
    5. Benjamin Enke, 2020. "Moral Values and Voting," Journal of Political Economy, University of Chicago Press, vol. 128(10), pages 3679-3729.
    6. Shayo, Moses, 2009. "A Model of Social Identity with an Application to Political Economy: Nation, Class, and Redistribution," American Political Science Review, Cambridge University Press, vol. 103(2), pages 147-174, May.
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    More about this item

    Keywords

    Social identity; Political economy; Tariff formation; Protectionism; Populism;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation

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