Self-Enforcing Trade Agreements and Lobbying

By Kristy Buzard (Syracuse University)

Going back to the mid-1980s, the repeated prisoner’s dilemma has been used to model the absence of strong external enforcement mechanisms for trade agreements.[1] Cooperation is enforced by promises of future punishment for any deviation from the agreement, and the amount of cooperation that can be achieved depends on the severity of the chosen punishments. The strongest incentive-compatible punishment is often the grim trigger strategy in which all players play the static Nash equilibrium forever when any of them defects.

More recent work shows that grim trigger punishments can be improved upon in some circumstances. Jee-Hyeong Park, for instance, has demonstrated that the presence of asymmetric information and imperfect monitoring can make it more efficient to choose shorter punishments.[2] In a similar setting, Alberto Martin and Wouter Vergote show that retaliation — i.e. delayed punishment — dominates reciprocity.[3]

In a recent paper, I identify a different rationale for limiting punishments: endogenous politics.[4] This paper is the first to incorporate endogenous lobbying along the lines of the classic Grossman-Helpman “Protection for Sale” model — the standard model for endogenizing politics in trade policy — into a repeated-game setting. In place of a unitary government, this model has two branches of government who share policy-making power.[5] By endogenizing the political economy weights, one can address questions about the commitment value of trade agreements, and examine the implications of self-enforcement constraints for the design of trade agreements.

I assume that the social-welfare maximizing executives of two countries choose trade agreement tariffs that must then be implemented by politically-susceptible legislatures.[6] For simplicity, only the import-competing industry is represented by a lobby. The weight the legislature puts on the import-competing industry’s profits increases in lobbying effort, which can be thought of as including campaign contributions as well as broader measures of lobbying activity. The lobby will choose its effort level to optimally influence the legislature’s decisions about whether to abide by the trade agreement and how to set tariffs in the absence of an agreement. Assuming there is no uncertainty about the effect of lobbying effort on the outcome of the political process, the lobby either exerts the minimum effort needed to derail the agreement or exerts no effort at all. The executives maximize social welfare by choosing the lowest tariffs that make it unattractive for the lobbies to provoke the legislature to violate the trade agreement. There will thus be no trade disputes in equilibrium, but the out-of-equilibrium threat that a lobby might provoke one is crucial in determining the equilibrium trade agreement structure.

Adding a lobby to the usual repeated-game model adds a new constraint. The constraint on the legislature is loosened by an exogenous increase in the length of the punishment: defections become relatively more unattractive as the punishment becomes more severe as in the standard prisoner’s dilemma. However, the new constraint due to the presence of lobbying becomes tighter because the lobby prefers punishment periods. The higher tariffs during punishment periods give the lobby increased incentive to exert effort as the punishment lengthens. In the face of this heightened lobbying incentive, the executives must raise the trade agreement tariff to avoid a trade dispute.

The optimal Nash-reversion punishment strikes a balance between these two competing forces, so adding endogenous politics suggests an optimal length for punishments: it is  finite for most values of the political weighting function and can be derived directly from the players’ incentive constraints.[7] Shortening the punishment in models with uncertainty serves to increase welfare by minimizing time spent in punishment periods. Since there is no uncertainty in this model, the players remain in the cooperative state in all periods.[8] Here, social welfare improves because shorter punishments weaken the lobby’s incentive to exert effort and this allows the executives to reduce the trade agreement tariffs.

For a given punishment length, increases in the patience of the legislature mean the lobby must exert more effort to induce the legislature to endure the punishment. The executive can thus reduce trade agreement tariffs without fear that the agreement will be broken. Increases in the lobby’s patience and the lobby’s ability to influence the legislature (as measured by the political weighting function) work in the opposite direction: they allow the lobby to exert less effort to provoke a trade dispute, and therefore higher equilibrium trade agreement tariffs are necessary to avoid a dispute.

The optimal punishment length itself also depends on how readily special interests are able to influence the political process. If the lobby is weak, the optimal punishment converges to that of the model without a lobby: longer punishments are better because the key constraint is the legislature’s. As the lobby becomes more influential, the optimal punishment becomes shorter because the lobby’s incentive becomes more important. That the optimal length of punishments is a function of the influence of the lobbies reinforces the idea that endogenizing politics can be critically important for institutional design questions.


Bagwell, K., and R.W. Staiger, (2005); “Enforcement, Private Political Pressure, and the General Agreement on Tariffs and Trade/World Trade Organization Escape Clause.Journal of Legal Studies, 34(2): 471–513.

Buzard, K., (2017a); “Self-Enforcing Trade Agreements and Lobbying.Journal of International Economics, 108(1): 226–242.

Buzard, K., (2017b); “Trade Agreements in the Shadow of Lobbying.” Review of International Economics, 25(1): 21–43.

Dixit, A., (1987); “Strategic Aspects of Trade Policy.” in: T.F. Bewley (ed.), Advances in Economic Theory: Fifth World Congress. Cambridge University Press, pp. 329–362.

Maggi, G., and A. Rodríguez-Clare, (2007); “A Political-Economy Theory of Trade Agreements.” The American Economic Review, 97(4): 1374–1406.

Martin, A., and W. Vergote, (2008); “On the Role of Retaliation in Trade Agreements.” Journal of International Economics, 76(1): 61–77.

Milner, H.V., and B.P. Rosendorff, (1997); “Democratic Politics and International Trade Negotiations: Elections and Divided Government as Constraints on Trade Liberalization.” Journal of Conflict Resolution, 41(1): 117–146.

Park, J.-H., (2011); “Enforcing International Trade Agreements with Imperfect Private Monitoring.” Review of Economic Studies, 78(3): 1102–1134.


[1] See for example Dixit (1987).

[2] Park (2011).

[3] Martin and Vergote (2008).

[4] Buzard (2017a).

[5] This approach follows Milner and Rosendorff (1997).

[6] The model admits an interpretation in which the same branch of government both negotiates the trade agreement and decides on the applied tariff ex-post, and thus the one-shot game shares much in common with Maggi and Rodríguez-Clare (2007).

[7] In Park (2011), the finite punishment length is due to imperfect monitoring and/or uncertainty.

[8] In Buzard (2017b), I show how uncertainty can be incorporated into this model.

Associate Research Director – Trade, Investment and Productivity

National Institute of Economic and Social Research (NIESR)

The National Institute of Economic and Social Research (NIESR) is one of Britain’s most influential and prestigious independent research centres. It specialises in applied social and economic research, combining high academic standards with relevance to policy making. Further information about NIESR is available at

NIESR has a long record of leading research on productivity and trade. Our research focuses on improving the measurement of production, understanding the influence of education, training & skills on economic performance, the drivers of firm behaviour and innovative capacity and the changing nature and role of external trade in developing competitiveness and also changing the patterns of employment in the UK.

We are looking to appoint an Associate Research Director with strong quantitative skills to manage our Trade, Productivity and Investment directorate. This directorate focusses on a number of themes, such as: the impact of Brexit on the economy, issues affecting trade in services and financial services, housing, taxation and debt, as well as productivity analysis.

Some of the current research questions under consideration are: Why is the UK less productive than similarly advanced nations and what can be done about it? How the gains from economic growth are distributed and why does this matter? What drives firms’ investment patterns and what is the role of institutions, firms and financial intermediation in explaining trends and cycles in productivity? These questions have gained far greater significance since the global financial crisis with the decline in productivity growth (especially in many leading OECD countries) and the stagnation of income faced by many families. Understanding these challenges are key to policy making and our future prosperity.

The position will be offered as a full –time permanent contract with a salary range of £55,000 – £85,000 FTE per annum (depending on experience), membership of the USS pension scheme as well as 30 days annual leave, starting as soon as possible. We will consider applications from candidates wishing to undertake a job share, a full or part-time secondment or on a part-time basis in conjunction with an academic post.

Further Information

For an informal discussion or further information, please contact the Director, Professor Jagjit S. Chadha, , or on 020 7222 7665 or Research Director Professor Peter Dolton on 

To Apply

Applicants should provide a full CV and a covering letter of no more than 2 pages, explaining their suitability and interest in this post, to: Ruth Hallesy via email:  with the subject line ‘[Name] ARD P&T’. The covering letter must also specify the approximate date you would be available to start work and give details of four referees.

Closing date for applications is midday on 20th January 2018.
Interviews will be held w/c 26th January 2018.

Due to the large number of applications we usually receive, only shortlisted applicants will be contacted.

Job Description

Main Purposes of the Job:

Develop, design and lead on a number of concurrent research projects within area of expertise productivity and trade. Actively cultivate external networks/future sources of funding and develop research proposals so that funding targets are achieved for own role, other team members and for NIESR. Contribute to and implement NIESR strategies and policies. The production of well-regarded research in top journals with impact and citations is expected.

Key Responsibilities:


  • Actively develop networks/leads for potential sources of funding and engage with senior contacts at strategic level
  • Support senior colleagues in developing alternative sources of funding
  • Prepare and draft research bids and proposals with support from other team members, regularly and consistently.


  • Oversee the design of research programmes/models, the setting up and conduct of research using appropriate methodology, with input from colleagues/guidance from the Director or Research Director as appropriate. Engage in relevant research projects. Responsible for timely project delivery in research area.
  • Lead and manage a team of researchers to achieve the project objectives.
  • Project manage research activities and grant conditions for own areas and ensure progress reports are submitted, as required, to funders.
  • Ensure team is appropriately funded, individually and collectively.


  • Prepare and present findings of research activity for peer review. Submit high quality academic and/or policy research output for academic publications, reports, model features, and newspaper or website articles.
  • Oversee activities where research is being led by other team members.
  • In tandem with the Director or Research Director, plan and implement strategy to disseminate/promote research more widely and achieve maximum impact on public, policymakers and opinion-formers.
  • Present research findings to internal and external audiences/funders at conferences/seminars, supporting less experienced team members.

Staff Management and Development

  • Lead, manage and support direct reports and teams. Ensure appropriate staff are recruited, motivated and developed, including carrying out appraisals, providing training and advising on professional development.
  • Direct reports: Economists/Senior Economists in team.


  • Contributes to the overall activities of their research team/wider NIESR team as required.
  • Undertakes any other duties related to the job purpose which may be necessary to the work of the role.
  • Represents NIESR in a professional manner to stakeholders and all audiences.
  • Is flexible within the broad remit of the post.
  • Responsible for the health, safety, welfare of self, other members of staff and visitors.
  • Attends and participates in NIESR’s performance, development and training programme.
  • Abides by NIESR’s organisational policies, codes of conduct and practices.
  • Provides support as required to the Director and the Chief Operating Officer.

Person Specification


  • PhD in economics or another relevant quantitative social science;
  • High level research capability with extensive knowledge of a range of research techniques and methodologies; particularly quantitative and econometric approaches;
  • Reputation for research expertise within a subject area with evidence of recognition of achievement for high quality research output.

Desirable Experience

  • Experience of research excellence in subject area.
  • Experience of managing research projects and teams.
  • Experience of achieving impact through disseminating findings;
  • Experience of writing proposals and bringing in funding for self and others.

Skills & Attributes

  • Commitment to high quality research in the core NIESR areas;
  • Highly motivated with the ability to manage own projects and those of team to meet deadlines and the ability to structure workload so that time is allocated efficiently between research, communication and funding proposals;
  • Well-developed leadership and management skills;
  • Proven ability to raise significant research funding for own role and others;
  • Ability to develop senior external contacts to promote NIESR and influence/engage with potential funders;
  • A high level of critical thinking with the ability to analyse results and to support others in carrying out these tasks;
  • Ability to communicate complex information in a clear and coherent way to a range of audiences.
  • Ability to write complex reports and papers accurately and clearly.
  • Ability to communication/present research verbally to individuals and groups with impact;
  • Ability to work with members of other teams if research-led funding opportunities imply the need for cross-topic co-operation;
  • Ability to work collaboratively and as part of a team as well as the ability to impact NIESR-wide strategic issues and to play a part in the overall management of NIESR


Associate Professor in Political Economy, University of Oxford – Department for Continuing Education and Kellogg College

Grade 36S: £45,562 – £61,179 p.a

The University is seeking to appoint an Associate Professor in Political Economy, to commence as soon as possible. The post will be held in the Department for Continuing Education, University of Oxford. The postholder will benefit from a Fellowship at Kellogg College.

There will be the opportunity to contribute to further development of the research and teaching of the Political Economy programme, additionally the postholder will have the opportunity to contribute to a wide range of provision, as appropriate to their expertise, including directing and overseeing the Department’s current activity and future development in this disciplinary area. The postholder will be Director of Studies for Economics, this involves academic oversight of the quality and standards of courses, and the recruitment and induction of teaching staff both from inside and outside the University. You will also be part of a lively and intellectually stimulating research community which performs to the highest international levels in research and publications, and will have access to the excellent research facilities which Oxford offers.

You will have a doctorate in economics, be an effective teacher at all levels of university education, and possess a proven record of research and publication, including research grant activity and academic leadership ability and demonstrable skills in collaborative working.

The Department for Continuing Education is the leading Continuing Education department in the UK. Committed to public engagement, the Department is multidisciplinary and encourages interdisciplinary teaching and research.

This appointment is for a fixed-term until (in the first instance) 31 December 2022 to cover a period of special leave.

The closing date for applications is 12.00 noon on 15 January 2018. Interviews will be held on 1 February 2018.

Please note that the University of Oxford’s retirement policy has changed. With effect from 1 October 2017, all employees at Grade 8 and above have a retirement age of the 30 September before the 69th birthday. All employees at Grades 1-7 do not have a set retirement age. Further details are available here:

Contact Person: Suki Kenth Vacancy ID: 131175
Contact Phone: 01865 280152 Closing Date: 15-Jan-2018
Contact Email:

Fellow in International Economics

Title: Fellow in International Economics

  • Employer: Rice University (Baker Institute)
  • Location: United States
  • Position Type: Other Academic
  • Deadline: Jan 31, 2018

  • Job Description: 

    Rice University’s Baker Institute for Public Policy anticipates filling a Ph.D. level position in 2018. The Will Clayton Fellow in International Economics will conduct original policy research in international economics and make policy recommendations. Relevant research areas include trade, exchange rates, monetary policy, and international labor markets. The Fellow will engage other Institute fellows, policy-makers in government, and the general public in discussions involving international economics.

    We are particularly interested in candidates with specific skills in statistical analysis and the ability to produce empirical research.

    Two years of relevant research experience are required for this full-time position with competitive compensation. Candidates who recently completed or expect to soon complete a Ph.D. in economics are encouraged to apply. Additional related experience may be substituted in lieu of the education requirement.

    The Baker Institute is a non-partisan, university-based think tank that produces high-quality public policy research. Rice University is an Equal Opportunity/Affirmative Action Employer.

    Applications completed by December 17, 2017 will be considered for interviews at the AEA Annual Meeting. Preliminary applications will be accepted through JOE. Finalists will be required to complete an application at