Jobs, Jobs, Jobs: A "New" Perspective on Protectionism

Abstract

This paper analyzes the determinants of protectionism in a small open economy with search frictions. In this environment, jobs generate rents whose access depends on the level of trade protection. By raising the domestic price of a good, a government may attract more firms in a particular industry. This raises the probability that workers will find jobs in this sector, and in turn, will benefit from the associated rents. Though simple, this channel may help explain a variety of stylized facts on the structure of trade protection and individual trade-policy preferences.