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Politically Imposed Entry Barriers

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Author Info

  • Paul H. Rubin

    (Emory University)

  • Mark A. Cohen

    (Vanderbilt University)

Abstract

The antitrust agencies analyze consequences of proposed mergers assuming that imports are constrained by existing quotas, a second-best approach. This policy is flawed. Quotas are endogenous. If a merger allows firms to reduce output, the quota will be increased. If an industry has sufficient political power to obtain subsidies from government then the authorities should assume that these subsidies will be reduced if market power increases. Paradoxically, for political entry barriers truly in the public interest, the antitrust authorities should take the barrier as given. We provide evidence of a large adjustment of tariffs to changes in market power.

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File URL: http://college.holycross.edu/RePEc/eej/Archive/Volume18/V18N3P333_344.pdf
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Bibliographic Info

Article provided by Eastern Economic Association in its journal Eastern Economic Journal.

Volume (Year): 18 (1992)
Issue (Month): 3 (Summer)
Pages: 333-344

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Handle: RePEc:eej:eeconj:v:18:y:1992:i:3:p:333-344

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Postal: c/o Dr. Alexandre Olbrecht, The Anisfield School of Business 205, Ramapo College, 505 Ramapo Valley Road, Ramapo, New Jersey 07430, USA
Phone: (201) 684-7346
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Web page: http://www.ramapo.edu/eea/journal.html
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Related research

Keywords: Firm; Government; Import; Merger; Policy; Political; Quotas; Subsidies;

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References

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  1. Richard E. Caves, 1976. "Economic Models of Political Choice: Canada's Tariff Structure," Canadian Journal of Economics, Canadian Economics Association, Canadian Economics Association, vol. 9(2), pages 278-300, May.
  2. McKee, Michael & West, Edwin G, 1981. "The Theory of Second Best: A Solution in Search of a Problem," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 19(3), pages 436-48, July.
  3. Buchanan, James M & Lee, Dwight R, 1992. "Private Interest Support for Efficiency Enhancing Antitrust Policies," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 30(2), pages 218-24, April.
  4. Faith, Roger L & Leavens, Donald R & Tollison, Robert D, 1982. "Antitrust Pork Barrel," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 25(2), pages 329-42, October.
  5. Hazlett, Thomas W, 1992. "The Legislative History of the Sherman Act Re-examined," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 30(2), pages 263-76, April.
  6. Becker, Gary S, 1983. "A Theory of Competition among Pressure Groups for Political Influence," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 98(3), pages 371-400, August.
  7. William M. Landes & Richard A. Posner, 1975. "The Independent Judiciary in an Interest-Group Perspective," NBER Working Papers 0110, National Bureau of Economic Research, Inc.
  8. Noam, Eli, 1984. "Market Power and Regulation: A Simultaneous Approach," Journal of Industrial Economics, Wiley Blackwell, Wiley Blackwell, vol. 32(3), pages 335-47, March.
  9. Godek, Paul E, 1985. "Industry Structure and Redistribution through Trade Restrictions," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 28(3), pages 687-703, October.
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Cited by:
  1. Steven Globerman, 1990. "Trade liberalization and competitive behavior: A note assessing the evidence and the public policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 9(1), pages 80-88.

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