We study the implications of reference dependency and loss aversion features of individual preferences in trade policy determination and show these behavioural features help explain why governments change the trade restrictiveness in order to cushion the domestic prices from world price shocks....

The fairly widespread view on the positive association between trade openness and income has been debated over the years due to serious estimation flaws prevailing in the cross-country empirical literature. This paper contributes to this debate by re-examining the long-run relationship between...