Premium
Privatization and the Political Economy of Strategic Trade Policy
Author(s) -
Feeney JoAnne,
Hillman Arye L.
Publication year - 2001
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/1468-2354.00120
Subject(s) - diversification (marketing strategy) , economics , incentive , commercial policy , portfolio , government (linguistics) , politics , scope (computer science) , trade barrier , international economics , international trade , market economy , business , finance , linguistics , philosophy , marketing , political science , computer science , law , programming language
This article considers the interdependence between international financial markets, privatization, and strategic trade policies. We describe an economy where portfolio allocations are chosen by risk‐averse agents who rationally forecast future trade policies. Assuming a government responsive to the policy preferences of voters, we show that ownership structure affects trade policy through the incentives for lobbying by private agents. Portfolios and trade policy are thus jointly determined in political‐economic equilibrium. Privatization of state‐owned industry exerts an important influence over the trade policies chosen by domestic and foreign governments by expanding the scope for individual diversification.