PUB - Publikationen an der Universität Bielefeld

In the first chapter of the thesis, We discuss a general context and provide an overview of the dissertation. Furthermore, we outline the contributions.

In the second chapter, based on the Protection for Sale approach of Grossman and Helpman (1994), we develop a theoretical model in which exogenously organised groups provide political contributions to influence trade policy. The incumbent government cares about contributions, yet at the same time, takes into account the reactions of voters. We formally consider voting decisions of citizens, assuming they have heterogeneous ignorance thresholds, and explicitly derive the objective function of the policy-maker. We find that the resulting equilibrium structure of protection differs from the standard case. Free trade obtains only if no group lobbies and ignorance levels are the same. On average, more ignorant groups will have lower (if any) protection from the policy-maker and, also, groups represented by lobbies will not always be supported by the incumbent government.

In chapter three, we study and compare the stability of trade policy arrangements in two different regulatory scenarios, one with and one without Preferential Trade Agreements (PTAs), i.e. current vs modified WTO rules. Unlike the existing literature, our work considers an extensive choice set of trade constellations, containing both available PTAs, Customs Unions (CUs) and Free Trade Agreements (FTAs), as well as Multilateral Trade Agreements (MTAs), while assuming unlimited farsightedness of the negotiating parties. With symmetric countries and under both the current and the modified WTO rules, the Global Free Trade (GFT) regime emerges as the unique stable outcome. In the case of asymmetry, the results are driven by the relative size of the countries. If the world is in the vicinity of symmetry and two out of three countries are close to identical while relatively smaller than the other one, the area where the GFT regime is stable increases when prohibiting PTAs. However, when two similar countries are relatively larger, the availability of PTAs is conducive to the stability of the GFT regime. Finally, if the world is further away from symmetry, full trade liberalisation is not attainable at all, and an area where the Most-Favoured-Nation (MFN) regime is stable appears in the scenario without PTAs. Thus, the direction of the effect of PTAs on trade liberalisation depends on the degree of asymmetry among countries.

In the last chapter, we deal with normative social decision making under ambiguity. Imagine an individual facing a decision problem affecting society as a whole and suppose that the choice features uncertainty in the form of belief systems for each member of the group. By combining the concept of an impartial observer with that of second-order beliefs, this chapter derives a representation of the preferences of an individual in such a situation using an axiomatic approach. It ultimately extends (a generalised version of) Harsanyi's Impartial Observer Theorem (1953) to include uncertainty by building on the work of Grant et al. (2010) and Seo (2009).