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Declining Industries and Persistent Tariff Protection

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  • Magee, Christopher
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    Abstract

    The paper uses a political economy framework to explain the empirical observation that trade protection is persistent. The assumptions that are shown to generate endogenous tariff persistence in the model are quite plausible: agents are uncertain about future prices, tariffs are affected by political pressure, and producers of the import-competing good own sector-specific human capital that may be lost if they exit the industry. The model also reveals that, under the conditions listed above, industries decline gradually in response to a price shock even when producers do not face increasing costs of adjustment. Copyright 2002 by Blackwell Publishing Ltd.

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    Bibliographic Info

    Article provided by Wiley Blackwell in its journal Review of International Economics.

    Volume (Year): 10 (2002)
    Issue (Month): 4 (November)
    Pages: 749-62

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    Handle: RePEc:bla:reviec:v:10:y:2002:i:4:p:749-62

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    Cited by:
    1. Richard Baldwin, 2007. "Multilateralising Regionalism: Sphagetti Bowls as building Blocs on the Path to Global Free Trade," Working Papers id:1231, eSocialSciences.
    2. Meredith Crowley, 2006. "Why are safeguards needed in a trade agreement?," Working Paper Series WP-06-06, Federal Reserve Bank of Chicago.

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