Trade policies often create winners and losers within a society. For example, lowering tariffs on imports may benefit consumers by reducing prices, and harm domestic manufacturers by increasing competition. In this paper, the authors study trade policies to reveal the extent to which policymakers prioritize certain groups.
The authors develop a model to measure the tradeoffs between different beneficiaries of trade policies. Their model accounts for differences in exposure to international trade across regions and industries, both directly through imports and exports as well as indirectly through exposure to trade that arises from domestic supply chains. They apply their model to US trade policy in 2017 and estimate the value society places on a dollar transferred across individuals from 50 states (plus Washington, DC), and 23 industries. They find the following:
Trade policy is by no means the only policy tool available to governments seeking to help some of their constituents at the expense of others. Environmental policy, competition policy, and financial regulation are all areas to which the approach developed in the paper would be straightforward to apply. In all such cases, this analysis can offer a blueprint for identifying who the politically favored are and for evaluating the economic importance of the political favors they receive.