The Role of the Median Legislator in U.S. Trade Policy: A Historical Analysis

Article excerpt

I. INTRODUCTION

Tariff and trade policies have an interesting and dynamic history in the United States. Of critical importance to this history is the role played by the U.S. Congress. For most of U.S. history Congress was very active in setting levels of protection for U.S. firms, passing new tariff legislation on average every five or six years. As we will show, tariff rates shifted, sometimes dramatically, following a very specific change in the makeup of the U.S. Congress, namely a change in the median legislator.

We offer a simple, well-known model of decision making to explain the behavior of Congress. Assuming unidimensionality of voters' preferences, Black's [1958] Median Dominance Theorem predicts that, under majority rule, decisions will be determined by the preferences of the median voter. In this paper, we apply the median voter model to study legislative decision making. In particular, the median voter model suggests that tariff levels should change on a regular basis as demographic, economic, technological, and electoral forces, as well as interest group lobbying, alter the preferences of the median legislator in the Congress.

We find that this simple median legislator model does an excellent job of explaining trade policy till the 1930s. However, following passage of the Reciprocal Trade Agreements Act of 1934, and particularly during the post-World War II era, levels of protection no longer shift as a result of changes in the median legislator. Trade bills are enacted with no apparent change in the median, and changes in the median legislator are not followed by the passage of a new trade bill.

Our analysis of pre- and post-1934 legislation provides strong evidence that the nature of trade policy has changed substantially. There are several possible explanations for the change, due at least in part to the growing relative prosperity of the U.S. in the world economy and to institutional changes in trade policy making. In particular, the passage of the 1934 Reciprocal Trade Agreements Act, which led to a shift of power from the legislative to the executive branch of government, followed by the creation of the General Agreements on Tariffs and Trade (GATT) and the rise of bureaucratic powers all likely impacted the nature of trade policy making in the U.S. We discuss these and other possible reasons for the breakdown of the median voter model after 1934.

II. MEDIAN-VOTER DETERMINED TARIFF

In this section we briefly review the standard endogenous tariff voting model wherein the level of protection is determined by the preferences of the median voter (Mayer [1984]; Shepsle and Weingast [1984]; Weingast, Shepsle and Johnsen [1981]).(1) In Mayer's [1984] version of this model, a uniform tariff is determined via a majority vote referendum. Each individual is endowed with capital and labor and the individuals are ordered in decreasing, relative capital-labor abundancy. Each good is produced using capital and labor under constant returns to scale, and there is perfect interindustry factor mobility. Finally, all individuals have identical homothetic preferences. Under these conditions, each individual's relative endowment of factors will determine his or her preferences toward protection. Specifically, according to the Stolper-Samuelson theorem, capital-abundant (labor-abundant) individuals will prefer policies that increase the price of products that are capital intensive (labor intensive). Moreover, an individual's approval of protection for capital-intensive industries increases with his or her capital abundancy. Within this framework, Mayer shows that the equilibrium tariff will be determined by the median voter, whose preference is determined by his or her particular endowment of factors. Mayer's model predicts that as the population changes, the tariff will change.

While the Shepsle-Weingast [1984] model does not provide the formal link between economic incentives (i. …