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Seminar Report: “Domestic Institutions, Geographic Concentration, and Agricultural Liberalization”

On July 8, the Center for Positive/Empirical Analysis of Political Economy (co-hosted by the Empirical Political Science Workshop of the Waseda Institute of Political Economy) organized the seminar titled “Domestic Institutions, Geographic Concentration, and Agricultural Liberalization” by Prof. Megumi Naoi (Associate Professor, University of California, San Diego). There were about 30 participants, including Waseda students and others from in and outside of Japan, and there was a lively question-and-answer session regarding the report. Associate Professor Yuriko Takahashi, who organized this seminar, gave us an overview of the event.

For the seminar, Prof. Naoi presented the ongoing research on why income compensation for losers of trade liberalization failed to promote globalization.

Traditionally, it was argued that trade liberalization could be promoted by providing income compensation to the losers. However, the recent trend toward protectionism has cast doubt on the arguments. To address this issue, Prof. Naoi proposed a theory of “compensation contract,” which states that the key to solving this puzzle lies not in the policy preferences and perceptions of voters (demand-side factor), but in the differences in the constitutional structure (supply-side factor). The theory predicts that income compensation associated with trade liberalization is considered a contract made between the executive and legislative branches of government, and that the interaction of the constitutional structure and the geographic concentration of products will determine the credibility and cost of forming and enforcing the contract. From the theory, the following hypotheses were presented: “Parliamentary systems are more likely to liberalize geographically concentrated products and protect diffused products because it is easier to enforce a compensation contract within a party when a lower number of legislators/districts are involved; Presidential systems are more likely to liberalize geographically diffused products and protect geographically concentrated products because it is easier to enforce a compensation contract in the legislature when a larger number of legislators/districts are involved” (Kim, Naoi, and Sasaki 2021: 10).

In order to test the hypotheses, focusing on 48 democracies, the study estimated models that included as independent variables the geographic concentration of agricultural products which were measured using satellite remote-sensed cropland data, the constitutional structure, and the interaction term between these two. The result convincingly showed that compared to the presidential system, governments in parliamentary systems were more likely to liberalize the products with high geographic concentration. In addition, Prof. Naoi suggested that formulaic compensation and consultation systems could serve as institutional solutions to the commitment problem between the executive and legislative branches under presidential systems.

The presentation was followed by lively discussion between Prof. Naoi and participants including students, revolving around the need to consider free trade indicators other than tariffs, the applicability of the arguments to industrial products, and the measurement of party discipline. After the seminar, Prof. Naoi had a tutoring session for Waseda students and provided them with very useful advice for their research and future career building in international academic community. In this way, the seminar and the tutoring session were the invaluable opportunity to learn about the cutting-edge research in the field of international political economy, as well as to further internationalize our academic program.

Source: Kim, In Song, Megumi Naoi, and Tomoya Sasaki. 2021. “Domestic Institutions, Geographic Concentration, and Agricultural Liberalization.” Manuscripts in progress.

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