Protectionist Demands in Globalization
We analyze a small open economy. The citizens have single-peaked preferences on the tariff rate for an import good. They declare a publicly most preferred tariff rate to the government which has discretion in the choice of the implemented tariff rate. While the government has incentive not to deviate too much from the publicly chosen tariff rate, its final choice is determined by bargaining with a foreign lobby who has a much lower optimal tariff rate and offers monetary transfers to the government in return for lowered tariffs. We show that the expectation of such a foreign influence affects the citizens’ voting behavior. Namely, they tend to vote for a more protectionist tariff policy. Moreover, this behavior leads to an increase in transfers by the foreign lobby.