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Re-examination of the Mayer Median Voter Model of Trade Policy

Dhingra, Swati (2006): Re-examination of the Mayer Median Voter Model of Trade Policy.

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This paper examines the empirical validity of the Mayer-Heckscher-Ohlin (M-H-O) model. We test the inequality-tariff relationship studied by Dutt & Mitra (2002) as well as a large country version of Mayer’s model. Dutt and Mitra (2002) found support for the inequality-tariff implication of the model for a cross-section of countries in the 1980s, using physical capital and labor as the two factors in the MH- O model. Our results suggest that this finding is not robust. Instead, we find that when human capital and (unskilled) labor are taken as relevant factors, the Mayer implication is validated in the 1980s. Using cross-sectional country data, we also find that the Mayer implication holds for the 1990s with either physical capital or human capital. We discuss possible explanations for the different findings in the two periods. We extend the model to a large country and obtain tariff levels which are a function of the median voter component and a terms of trade factor. For the 1990s, the positive impact of terms of trade considerations on tariff levels across countries is validated. Using human capital, we find that the median voter component has a negative impact on tariffs in labor-abundant countries and a positive impact in capital-abundant countries.

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