"What Governments Maximize and Why: The View from Trade"

An entire paper estimating cross-country regressions with the estimated Grossman and Helpman (1994) weight on welfare as the dependent variable? I’m skeptical, even if the empirical results are plausible (governments are more concerned with welfare in the presence of more informed voters and more checks and balances, less so when media advertising and competitive elections prioritize special interest money).

  • The authors note that their estimates of the “government’s concern for general welfare” parameter are reasonable and thus differ significantly from five previous papers empirically estimating the Grossman-Helpman model. Why do they obtain different results?
  • The OECD countries in the sample largely make trade policy in multilateral negotiations, not a unilateral vacuum, so I am skeptical that the Grossman-Helpman (1994) model even applies.
  • If the authors hadn’t excluded economies without an elected legislature from the sample, how would they have handled Hong Kong’s estimated welfare concern of infinity? (Concern for welfare is inversely related to the tariff level, and Hong Kong’s tariffs are zero.)