Crisis Pushes Nations in Different Trade Policy Directions

Economic crises can spark both protectionist and liberalizing trade policies.

Firm-Level Competition Driven by Crises

This article examines how economic shocks influence trade policy competition through the actions of firms.

• Intensity: The severity of the shock affects firm resources.
• Duration: How long the crisis lasts shapes political strategies.

Endogenous Incentives for Diverging Policies

Crises create incentives not just to protect, but also to liberalize trade:

• Protectionist Tendencies: Initially rise as affected firms lobby for relief and other industries face resource scarcity.
• Liberalization Trends: Subsequently decrease when distressed firms lack resources for lobbying, allowing counter-lobbying from healthier sectors.

Theoretical & Empirical Integration

Our theoretical model is grounded in real-world mechanisms:

• Tested using sub-national and cross-national datasets.
• Supported by illustrations of how resource shifts impact political maneuverings across industries.