Trade Policy and Loss Aversion

We develop a political economy model where loss aversion and reference dependence are important in shaping people's preferences over trade policy. The policy implications of the augmented model differ in three ways: there is a region of compensating protection, where a decline in the world pric...

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Bibliographic Details
Main Authors:	Freund, Caroline, Ozden, Caglar
Format:	Journal Article
Language:	EN
Published:	2012
Subjects:	Trade Policy International Trade Organizations F130 Country and Industry Studies of Trade F140 Metals and Metal Products Cement Glass Ceramics L610
Online Access:	http://hdl.handle.net/10986/5753

id	okr-10986-5753
recordtype	oai_dc
spelling	okr-10986-57532021-04-23T14:02:23Z Trade Policy and Loss Aversion Freund, Caroline Ozden, Caglar Trade Policy International Trade Organizations F130 Country and Industry Studies of Trade F140 Metals and Metal Products Cement Glass Ceramics L610 We develop a political economy model where loss aversion and reference dependence are important in shaping people's preferences over trade policy. The policy implications of the augmented model differ in three ways: there is a region of compensating protection, where a decline in the world price leads to an offsetting increase in protection, such that a constant domestic price is maintained; protection following a single negative price shock will be persistent; and irrespective of the extent of lobbying, there will be a deviation from free trade that favors loss-making industries. The augmented model explains protections of the US steel industry since 1980. 2012-03-30T07:34:22Z 2012-03-30T07:34:22Z 2008 Journal Article American Economic Review 00028282 http://hdl.handle.net/10986/5753 EN http://creativecommons.org/licenses/by-nc-nd/3.0/igo World Bank Journal Article
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	EN
topic	Trade Policy International Trade Organizations F130 Country and Industry Studies of Trade F140 Metals and Metal Products Cement Glass Ceramics L610
spellingShingle	Trade Policy International Trade Organizations F130 Country and Industry Studies of Trade F140 Metals and Metal Products Cement Glass Ceramics L610 Freund, Caroline Ozden, Caglar Trade Policy and Loss Aversion
relation	http://creativecommons.org/licenses/by-nc-nd/3.0/igo
description	We develop a political economy model where loss aversion and reference dependence are important in shaping people's preferences over trade policy. The policy implications of the augmented model differ in three ways: there is a region of compensating protection, where a decline in the world price leads to an offsetting increase in protection, such that a constant domestic price is maintained; protection following a single negative price shock will be persistent; and irrespective of the extent of lobbying, there will be a deviation from free trade that favors loss-making industries. The augmented model explains protections of the US steel industry since 1980.
format	Journal Article
author	Freund, Caroline Ozden, Caglar
author_facet	Freund, Caroline Ozden, Caglar
author_sort	Freund, Caroline
title	Trade Policy and Loss Aversion
title_short	Trade Policy and Loss Aversion
title_full	Trade Policy and Loss Aversion
title_fullStr	Trade Policy and Loss Aversion
title_full_unstemmed	Trade Policy and Loss Aversion
title_sort	trade policy and loss aversion
publishDate	2012
url	http://hdl.handle.net/10986/5753
_version_	1764396185828720640

Trade Policy and Loss Aversion

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