Party Discipline as a Determinant of the Endogenous Formation of Tariffs

Abstract

Theory: This paper introduces the institutional elements of party behavior as a determinant of the endogenous formation of tariffs. It considers how party discipline affects which industries receive tariff protection from foreign imports. I develop a theoretical framework and generate a set of testable predictions. Hypotheses: Highly disciplined parties in majoritarian systems offer trade policies favorable to voters in marginal districts. At the margin, electorally consolidated industries located in marginal districts will be highly protected. However, in majoritarian systems with low party discipline, the model predicts tariff protection will favor large, electorally dispersed industries. Industries concentrated in marginal districts are expected to be the least favorably protected. Methods: Regression analysis is used on data from the 1970s on industry tariffs levels and industry employment levels across electoral districts in the United States and Canada. Results: The findings generally support the theoretical model. In Canada, industries highly concentrated in marginal districts receive the most favorable levels of protection. In the United States, industries located in safe districts receive more favorable levels of protection than industries located in marginal districts. Although electorally concentrated industries receive higher levels of protection, on average, than electorally decentralized industries; in the United States large, electorally dispersed industries are able to secure favorable levels of protection.