Trade, Factor Proportions and Politics

José A. Tavares, Universidade Nova de Lisboa

Abstract

This paper tests the implication in Mayer (1984) that capital-poor individuals prefer more trade openness in poor (capital-scarce) countries and less trade openness in rich (labor-scarce) countries. We use political rights as a proxy for the capital-labor endowment of the median voter and income per capita as a proxy for country endowments and find that, while both income per capita and political rights are positively associated with import intensity, their interaction displays a negative and robust negative association. Our results are robust to the inclusion of structural, geography and cultural determinants of openness, different estimation methods and different proxies for country endowments.