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.
