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Negotiated Trade Restrictions with Private Political Pressure

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  • Feenstra, Robert C
  • Lewis, Tracy R

Abstract

The authors consider a home government with political pressure to restrict trade. The foreign country is compensated with a portion of the tariff revenues or quota rents, but cannot directly observe the political pressure abroad. In this setting, the two countries negotiate over the volume of trade and transfer of rents, depending on the level of political pressure. The authors determine globally optimal, incentive-compatible trade policies in which the home government has no incentive to overstate (or understate) the pressure for protection. Copyright 1991, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.

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Bibliographic Info

Article provided by MIT Press in its journal Quarterly Journal of Economics.

Volume (Year): 106 (1991)
Issue (Month): 4 (November)
Pages: 1287-307

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Handle: RePEc:tpr:qjecon:v:106:y:1991:i:4:p:1287-307

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  1. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  2. Robert C. Feenstra & Jagdish N. Bhagwati, 1982. "Tariff Seeking and the Efficient Tariff," NBER Chapters, in: Import Competition and Response, pages 245-262 National Bureau of Economic Research, Inc.
  3. Wellisz, Stanislaw & Wilson, John D., 1986. "Lobbying and tariff formation: A deadweight loss consideration," Journal of International Economics, Elsevier, vol. 20(3-4), pages 367-375, May.
  4. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  5. Young, Leslie & Magee, Stephen P, 1986. "Endogenous Protection, Factor Returns and Resource Allocation," Review of Economic Studies, Wiley Blackwell, vol. 53(3), pages 407-19, July.
  6. Prusa, Thomas J., 1990. "An incentive compatible approach to the transfer pricing problem," Journal of International Economics, Elsevier, vol. 28(1-2), pages 155-172, February.
  7. Mayer, Wolfgang & Riezman, Raymond G., 1987. "Endogenous choice of trade policy instruments," Journal of International Economics, Elsevier, vol. 23(3-4), pages 377-381, November.
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