Publication:
Loss Aversion and Trade Policy

Simple item page
dc.contributor.authorFreund, Caroline
dc.contributor.authorÖzden, Çağlar
dc.date.accessioned2013-06-24T18:18:59Z
dc.date.available2013-06-24T18:18:59Z
dc.date.issued2004-09
dc.description.abstractThis paper provides new survey evidence showing that loss aversion and reference dependence are important in shaping people's perception of trade policy. Under the assumption that agents' welfare functions exhibit these behavioral elements, we analyze a model with a welfare-maximizing government and with the lobbying framework of Grossman and Helpman (1994). The policy implications of the augmented models differ in three important ways. One, there is a region of compensating protection, where a decline in the world price leads to an offsetting increase in protection, such that a constant domestic price is maintained. Two, protection following a single negative price shock will be persistent. Three, irrespective of the extent of lobbying, there will be a deviation from free trade that tends to favor loss-making industries. The augmented models are more consistent with the observed structure of protection, and in particular, explain why many trade policy instruments are explicitly designed to maintain prices at a given level.en
dc.identifierhttp://documents.worldbank.org/curated/en/2004/09/5114379/loss-aversion-trade-policy
dc.identifier.doi10.1596/1813-9450-3385
dc.identifier.urihttps://hdl.handle.net/10986/14152
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, D.C.
dc.relation.ispartofseriesPolicy Research Working Paper;No.3385
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectAGENTS
dc.subjectAGRICULTURE
dc.subjectCAMPAIGN CONTRIBUTIONS
dc.subjectCENTRAL BANKS
dc.subjectCOMPETITIVENESS
dc.subjectCONSTANT RETURNS TO SCALE
dc.subjectCONSUMER SURPLUS
dc.subjectCONSUMERS
dc.subjectDEMAND ELASTICITY
dc.subjectDEMAND FUNCTIONS
dc.subjectECONOMETRIC MODELS
dc.subjectECONOMICS
dc.subjectELASTICITY
dc.subjectEMPIRICAL EVIDENCE
dc.subjectEMPIRICAL STUDIES
dc.subjectEMPLOYMENT
dc.subjectENDOWMENTS
dc.subjectEQUILIBRIUM
dc.subjectEXCESS DEMAND
dc.subjectFIXED COSTS
dc.subjectFREE TRADE
dc.subjectIMPORTS
dc.subjectINCOME
dc.subjectINCOME LEVELS
dc.subjectINFLATION
dc.subjectINSURANCE
dc.subjectINSURANCE MARKETS
dc.subjectMARGINAL COST
dc.subjectMARGINAL VALUE
dc.subjectMARKET STRUCTURE
dc.subjectNASH EQUILIBRIUM
dc.subjectNET IMPORTS
dc.subjectOFFSETTING
dc.subjectPOLICY INSTRUMENTS
dc.subjectPOLITICAL ECONOMY
dc.subjectPRICE CHANGES
dc.subjectPRICE DECLINES
dc.subjectPRICE FLUCTUATIONS
dc.subjectPRICE INCREASES
dc.subjectPRODUCERS
dc.subjectPRODUCTION TECHNOLOGY
dc.subjectPROSPECT THEORY
dc.subjectPROTECTIONISM
dc.subjectQUOTAS
dc.subjectRISK AVERSE
dc.subjectRISK AVERSION
dc.subjectRISK LOVING
dc.subjectRISK SHARING
dc.subjectSALES
dc.subjectSPREAD
dc.subjectSUPPLY FUNCTIONS
dc.subjectTRADE BARRIERS
dc.subjectTRADE POLICIES
dc.subjectUTILITY FUNCTION
dc.subjectUTILITY FUNCTIONS
dc.subjectUTILITY THEORY
dc.subjectVOTERS
dc.subjectWELFARE FUNCTION
dc.subjectWORLD MARKETS
dc.titleLoss Aversion and Trade Policyen
dspace.entity.typePublication
okr.crossref.titleLoss Aversion and Trade Policy
okr.date.doiregistration2025-04-10T10:08:49.899833Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2004/09/5114379/loss-aversion-trade-policy
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeFinance and Markets
okr.globalpracticeFinance and Markets
okr.globalpracticeTrade and Competitiveness
okr.guid608021468781806472
okr.identifier.doi10.1596/1813-9450-3385
okr.identifier.externaldocumentum000009486_20040909123547
okr.identifier.internaldocumentum5114379
okr.identifier.reportWPS3385
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2004/09/09/000009486_20040909123547/Rendered/PDF/wps3385aversion.pdfen
okr.topicInsurance and Risk Mitigation
okr.topicInternational Economics and Trade::Free Trade
okr.topicPayment Systems and Infrastructure
okr.topicEconomic Theory and Research
okr.topicMacroeconomics and Economic Growth::Markets and Market Access
okr.topicEnvironmental Economics and Policies
okr.topicFinance and Financial Sector Development
okr.unitOff of Sr VP Dev Econ/Chief Econ (DECVP)
okr.volume1 of 1
relation.isAuthorOfPublication65ba4a02-ba22-5c96-8e04-6b9356d619e0
relation.isAuthorOfPublication3e463276-f18e-583e-b24b-62cb59e6ed6b
relation.isAuthorOfPublication.latestForDiscovery65ba4a02-ba22-5c96-8e04-6b9356d619e0
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
Files
Original bundle
Now showing 1 - 2 of 2
Thumbnail Image
Name:
wps3385aversion.pdf
Size:
273.43 KB
Format:
Adobe Portable Document Format
Download
No Thumbnail Available
Name:
wps3385aversion.txt
Size:
80.62 KB
Format:
Plain Text
Download
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
1.71 KB
Format:
Plain Text
Description:
Download
Collections
Policy Research Working Papers