PECN 600-2

Majors’ Seminar in Political Economy:

The Domestic Political Economy of International Trade Policy

Professor: Nelson

Office: Murphy Institute (108 Tilton)

Phone: 865-5317

The purpose of this course is to study the positive political economy of international trade. That is, we will examine the interaction of economics and politics that determine trade policy outcomes. In addtion to considering individual-level explanations, we will also develop institutional and structural accounts of trade policy determination. In the interest of concreteness, we will focus on US trade policy and institutions. In the last section of the course we turn to comparative analysis.

Although this is not a course on the economics of international trade, microeconomic tools will be used extensively in our analysis. Thus, Economics 301 is a prerequisite. While not required, a course on the application of microeconomics to the study of international trade (e.g. Econ 433) will make your life easier.

Primary texts for the course will be:


I.M. Destler (1995). American Trade Politics. 3rd Edition. Washington, DC: IIE.


P. Gourevitch (1986). Politics in Hard Times: Comparative Responses to International Economic Crises. Ithaca: Cornell University Press.


J. Hobson (1997). The Wealth of States: A Comparative Sociology of International Economic and Political Change. Cambridge: Cambridge University Press.

In addition, a packet of readings will be available in the department office.

Evaluation of Performance: This course is a seminar. That means active participation from all students in every class. So that you will be able to discuss the issues and the readings, every member of the seminar is responsible for having read all of the reqired material by the class in which it is to be discussed. In addition to class participation, your performance in this course will be evaluated on the basis of:


1) A mid-term examination (100 points);

2) A take-home final examination (100 points); and

3) A paper (100 points).

To receive an A, you must earn at least 270 points out of the total of 300 points available. To pass the course you must earn at least 120 total points. Grades between these limits will be determined on the basis of your performance relative to that of the class as a whole.

With regard to the midterm examination. This examination will be made up of a number of identification and short-answer questions, and an essay question that asks you to synthesize material from the part of the course immediately preceding the examination. The midterm examination will be given only on Monday, 9 March 1996 at 1:00 pm. Do not make travel or other plans that conflict with either date.

With regard to the final examination. The final exam will consist of several broadly synthetic questions dealing primarily with the material covered in the second part of the course. However, since the theoretical structures developed in the first part of the course consitute the basis for much of the discussion in the second part, the final also has an element of cumulativeness. The questions will be distributed the last day of class and due in my office at the time scheduled for our final exam–1:00pm, 1 May 1999.

With regard to the paper. It is in the nature of a course of this sort that much of the material presented will be at a fairly high level of generality. Thus, in an effort to provide you with the opportunity to develop some more detailed expertise, every student will write a paper on some, well specified aspect of the political economy of trade policy. By the end of the third week of class, each student will present, in writing, a proposal describing the issue s/he proposes to study. This is intended to be a substantial piece of research. An A paper must express a clear, positive argument and present evidence in support of that argument in a coherent fashion. I would expect most papers to be in the 25-30 page range. I expect you to use available primary and secondary sources, and I expect you to cite the authorities you use accurately and honestly. Plagiarism will not be tolerated. The paper is due by 5:00 pm on the last regularly scheduled day of class (20 April 1999). Late papers will not be accepted and will earn a grade of zero.

A couple of useful references: Much of our discussion will have direct reference to theories and results developed by trade economists. A couple of useful references on the economics of trade are:


-Stephen Husted and Michael Melvin (1990). International Economics. New York: Harper and Row. This is an excellent introductory text on international economics. Chapters 2-8 cover the basic economics of international trade and commercial policy.


-Neil Vousden (1990). The Economics of Trade Protection. Cambridge: Cambridge University Press. This is an excellent intermediate textbook that focuses specifically on the economics of trade policy.

For those who want more detail on the legal aspects of trade regulation, the industry standard is


-John Jackson, William Davey, and Alan Sykes (1995). Legal Problems of International Economic Relations. St. Paul, Minn.: West Publishing Co.

PECN 600     The Domestic Political Economy of International Trade   Spring 1999


I. Introduction–Review of Basic Microeconomic Concepts


Week 1: Basics of 2-Sector General Equilibrium Theory


•Handout #1 (pages 1-21)

II. Elements of a Theory of the Domestic Political Economy of International Trade Policy


Week 2: Trade and Income Distribution


•W. Stolper and P. Samuelson (1941). “Protection and Real Wages”. Review of Economic Studies; V.9-#?, pp. 58-73.


•N. Gaston and D. Nelson (forthcoming). “Trade and Wages in OECD Countries: Linking Theory and Evidence”. in Globalisation and Employment Patterns: Policy, Theory and Evidence. New York: Cambridge University Press.


•Handout #1, continued (pages 21-32)


Week 3: Preference Determination in Political Economy


•Handout #2


•H.K. Hall and D. Nelson (1989). "Institutional Structure and Time Horizon in a Simple Political-Economy Model: The Lowi Effect". International Spectator; V.24-#3/4, pp.153-173.


•J. Alt and M. Gilligan (1994). “The Political Economy of Trading States: Factor Specificity, Collective Action Problems and Domestic Political Institutions”. Journal of Political Philosophy; V.2-#?, pp. 165-192.


Week 4: Building a Simple Political Economy Model–Single-issue Referendum


•W. Mayer (1984). "Endogenous Tariff Formation". American Economic Review; V.74-#5, pp. 970-985.


•Hall, Kao, Nelson (1998). “Women and Tariffs: Testing Gender Gap in a Downs-Mayer Model”. Economic Inquiry; V.36-#2, pp. 320-332.


•Handout #3


Week 5: Building a Simple Political Economy Model–Lobbying


•D. Yoffie and S. Bergenstein (1985). "Creating Political Advantage: The Rise of the Corporate Political Entrepreneur". California Management Review; V.28-#1, pp. 124-139.


•G. Lehmbruch (1986). "Interest Groups, Government and the Politics of Protectionism". Aussenwirtschaft; V.41-#2/3, pp. 273-302.


•H.K. Hall and D. Nelson (1992). "Institutional Structure in the Political Economy of Protection: Legislated versus Administered Protection". Economics & Politics; V.4-#1, pp. 61-77.


•K. Gawande (1998). “Stigler-Olson Lobbying Behavior in Protectionist Industries: Evidence from the Lobbying Power Function”. Journal of Economic Behavior and Organization; V.35-#?, pp. 477-499.


•Handout #4


Week 6: Ignorance, Information, Ideology, and Policy Advice


•J. Levy (1994). “Learning and Foreign Policy: Sweeping a Conceptual Minefield”. International Organization; V.48-#2, pp. 279-312.


•D. Nelson (1998). “Non-Strategic Social Learning and Information Cascades with Applications to Political Economy”.


•J. Goldstein (1988). "Ideas, Institutions and American Trade Policy". International Organization; V.42-#1, pp. 179-217.


•E. Krauss and S. Reich (1992). "Ideology, Interests and the American Executive: Toward a Theory of Foreign Competition and Manufacturing Trade Policy". International Organization; V.46-#4, pp. 857-897.


•A.O. Krueger (1997). “Trade Policy and Economic Development: How We Learn”. AER; V.87-#1, pp. 1-22.

Midterm Exam–9 March 1999

III. Political Economy of US Trade Policy


Week 7: The Evolution of the Institutions of American Trade Policy-making


•Destler, Chapters 1-5


•D. Nelson (1989). "The Domestic Political Preconditions of US Trade Policy: Liberal Structure and Protectionist Dynamics". Journal of Public Policy. V.9-#1, pp. 83-108.


Week 8: Legislative Voting on Trade (optional topic)


•W. Keech and K. Pak (1995). “Partisanship, Institutions, and Change in American Trade Politics”. JoP; V.57-#4, pp. 1130-1142.


•W. Hansen and T. Prusa (1997). “The Role of the Median Legislator in US Trade Policy: A Historical Analysis”. Economic Inquiry; V.35-#1, pp. 97-107.


•C. Coughlin (1985). "Domestic Content Legislation: House Voting and the Economic Theory of Regulation". Economic Inquiry; V.23-#?, pp. 437-448.


•S. Marks (1993). "Economic Interests and Voting on the Omnibus Trade Bill of 1987". Public Choice, V.75-#1, pp. 21-42.


•R. Baldwin and C. Magee (1998). “Is Trade Policy for Sale? Congressional Voting on Recent Trade Bills”. NBER Working Paper, #6376.


Week 9: Administered Protection (optional topic)


•Destler, Chapter 6


•J.M. Finger, H.K. Hall and D.R. Nelson (1982). "The Political Economy of Administered Protection". American Economic Review; V.72-#3, pp. 452-466.


•R. Baldwin and J. Steagall (1991). "An Analysis of Factors Influencing ITC Decisions in Antidumping, Countervailing Duty and Safeguards Cases". Weltwirtschaftliches Archiv; V.130-#2, pp. 290-307.


•M. Moore (1992). "Rules or Politics? An Empirical Analysis of Antidumping Decisions". Economic Inquiry; V.30-#3, pp. 449-466.


•W. Hansen and T. Prusa (1997). “The Economics and Politics of Trade Policy: An Empirical Analysis of ITC Decision Making”. Review of International Economics; V.5-#2, pp. 230-245.


Week 10: Contemporary Trade Politics in the US


•Destler, Chapters 7-9


•D. Yoffie (1989). "American Trade Policy: An Obsolete Bargain?". in J. Chubb and P. Peterson, eds. Can Government Govern? Washington, DC: Brookings, pp. 100-138.

IV. Macro and Comparative Political Economy of Trade


Week 11: Macro Political Economy Theory


•Gourevitch, Chapters 1 and 2


•Hobson, Chapter 1


•J. Kurth (1979). "The Political Consequences of the Product Cycle". International Organization; V.33-#1, pp. 1-34.


•A. Milward (1981). "Tariffs as Constitutions". in S. Strange and R. Tooze, eds. The International Politics of Surplus Capacity. London: Allen and Unwin. pp. 57-66.


•J. Ruggie (1982). "International Regimes, Transactions, and Change: Embedded Liberalism in the Post-War Order". International Organization; V.36-#2, pp. 379-415.


Week 12: The Evolution of Trade Regimes in the Late 19th and Early 20th Centuries


•Gourevitch, Chapters 3-5


•Hobson, Chapters 2-5


Week 13: Concluding


•Gourevitch, Chapter 6


•Hobson, Chapters 6 and 7

Final Exam Distributed, Paper Due: 20 April 1999

Final Exam Due: 1:00pm, 1 May 1999.