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Protectionist Lobbying and Strategic Investment

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  • Richard Damania

Abstract

Why are some uncompetitive industry sectors so effective in lobbying for greater protection and support? This paper attempts to explain the lobbying success of these industries in terms of the strategic role of investment in technology as a credible commitment device. By eschewing potentially profitable investment opportunities firms credibly signal to the government that the cost of a tariff reduction will be substantial. This enables the firms to lobby more effectively for policy concessions. Political considerations may therefore provide a significant incentive for firms to reject investment in newer technologies, even when these lower production costs.

Suggested Citation

  • Richard Damania, 2003. "Protectionist Lobbying and Strategic Investment," The Economic Record, The Economic Society of Australia, vol. 79(244), pages 57-69, March.
    • Handle: RePEc:bla:ecorec:v:79:y:2003:i:244:p:57-69
    DOI: 10.1111/1475-4932.00078
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    Cited by:

    1. Hamid Beladi & Sugata Marjit & Avik Chakrabarti, 2009. "Tariff Jumping and Joint Ventures," Southern Economic Journal, John Wiley & Sons, vol. 75(4), pages 1256-1269, April.
    2. Kosteas, Vasilios D., 2008. "Trade Protection and Capital Imports in the Mexican Manufacturing Sector," World Development, Elsevier, vol. 36(12), pages 2822-2837, December.
    3. Satoshi Honma, 2005. "Pollution Tax under Lobbying Duopolists," Discussion Papers 22, Kyushu Sangyo University, Faculty of Economics.
    4. Hamid Beladi & Sugata Marjit & Avik Chakrabarti, 2006. "Tariff Jumping and Joint Ventures," Working Papers 0002, College of Business, University of Texas at San Antonio.

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