The Political Economy of Poland's Trade Policy: Empirical Verification of the Grossman-Helpman Model

This paper analyzes rent-seeking behavior in trade policy based on the Grossman-Helpman (1994) framework. Our empirical implementation deals with Polish trade policy in the late 1990s. We use the instrumental variable approach to estimate the model, accounting for possible endogeneity of the regressors. Our results suggest that lobbies were important in the process of Polish trade policy formation in the period under consideration. The degree of the lobbies' influence is, however, significantly lower than in the case of the United States. The model seems to perform better for most-favored-nation cases than preferential tariffs. In the former case, our estimates are in line with the original theory.

The Cost of Missed EU Integration

The 2016 referendum held in the UK about the possibility to quit EU membership as well as a wave of populistic movements sweeping all over European Countries seem to suggest that less integration could be an outcome for the European Union. This paper has the aim to measure the cost of a missed integration, by highlighting what GDP growth would be in case of a missed integration. It does so by building a scenario of missed integration and compares it with a reference scenario. Scenarios are based on the Macroeconomics, Social, Sectoral, Territorial (MASST) model that has recently been updated to its fourth generation, whereby regional economic relations are tested econometrically. The estimated cause–effect chains are then the basis to build new scenarios simulated under complex sets of internally coherent assumptions in a simulation stage. The reference scenario presented is not a simple extrapolation of past trends; the post-crisis period registered structural changes to be taken into account for the future. In the integration scenario, we assume further integration within the EU to take place through the following changes: (1) higher trade flows among EU countries (“production integration effect”); (2) higher decrease in non-tariffs barriers (“proximity effect to larger markets”); (3) higher trust within and among countries (“social effect”); (4) higher quality of government (“institutional effect”); (5) stronger cooperation networks among cities (“cooperation effect”); and (6) higher exports (“market integration effect”). Results show that a more integrated scenario leads to faster economic growth across all EU countries. Territorial disparities are also initially lower in the case of more integration, although this difference abates over time. Lastly, the gains from integration are not spatially even and some regions gain more than others