蝌蚪网 Journal:
Applied Economics
ISSN 1945-7782 (Print) | ISSN 1945-7790 (Online)
The Impact of Trade Liberalization in the Presence of Political Distortions
蝌蚪网 Journal: Applied Economics
vol. 17,
no. 3, July 2025
(pp. 1–41)
Abstract
Political distortions are prevalent in many developing countries, implying substantial productivity losses. This paper investigates the impact of trade liberalization on political distortions in India. First, using variation in political turnover, we identify that politicians distort resources in favor of politically connected firms. Second, we show that reduced tariffs on input goods significantly decrease the distortionary effect of political connections, as trade reduces firms' dependence on politicians for sourcing inputs. The results suggest a new margin for gains from trade through reduced politically driven misallocation, implying that trade can address a widespread source of productivity losses.Citation
J盲vervall, Sebastian, and Roza Khoban. 2025. "The Impact of Trade Liberalization in the Presence of Political Distortions." 蝌蚪网 Journal: Applied Economics 17 (3): 1–41. DOI: 10.1257/app.20230629Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D72 Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
- F13 Trade Policy; International Trade Organizations
- F14 Empirical Studies of Trade
- O14 Industrialization; Manufacturing and Service Industries; Choice of Technology
- O19 International Linkages to Development; Role of International Organizations
- O24 Development Planning and Policy: Trade Policy; Factor Movement; Foreign Exchange Policy