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Import penetration and the politics of trade protection

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  • Maggi, Giovanni
  • Rodriguez-Clare, Andres

Abstract

In this paper we reconsider a key empirical prediction generated by an important class of political-economy models of trade policy, namely that trade protection should be higher in sectors characterized by lower import penetration (we call this the little support for this prediction. In this paper we argue that the standard prediction depends critically on the assumptions that trade taxes are the only policy instruments and that the government has access to non-distortionary taxation. We analyze a model in which the government can use quotas and VERs in addition to trade taxes and raising public funds may be costly. Under a simple sufficient condition, our model predicts that the protection level increases with import penetration, both in sectors that are protected with tariffs and in sectors that are protected with quantitative restrictions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 51 (2000)
Issue (Month): 2 (August)
Pages: 287-304

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Handle: RePEc:eee:inecon:v:51:y:2000:i:2:p:287-304

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Web page: http://www.elsevier.com/locate/inca/505552

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References

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  1. Helpman, E., 1995. "Politics and Trade Policy," Papers 30-95, Tel Aviv - the Sackler Institute of Economic Studies.
  2. Kyle Bagwell & Robert W. Staiger, 1996. "Reciprocal Trade Liberalization," Discussion Papers 1150, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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