The Political Economy of the International Protection Cycle

Abstract

This paper shows why and when a government responds to interest group’s pressure for protection in the election period. The result explains how free trade and protectionism succeed one another. The model considered is a two country differential game with both pro-protectionist interest groups of import compet - ing industries and anti-protectionist interest groups of export industries. If the p ro - p rotectionist interest groups are able to obtain protection and voters are important, the level of protection is decreasing towards the end of the election period whenever the government expects losing the election with a positive probability.