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Food Protection for Sale

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Author Info
Lopez, Rigoberto A.
Matschke, Xenia

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Abstract

This article tests the Protection for Sale (PFS) model using detailed data from U.S. food processing industries from 1978 to 1992 under alternative import demand specifications. All empirical results support the PFS model predictions and previous empirical work qualitatively. Although welfare weights are very sensitive to import demand specification, a surprising result is that we obtain weights between 2.6 and 3.6 for domestic welfare using import slopes or elasticities derived from domestic demand and supply functions. In contrast, results based on import slopes or elasticities from directly specified import demands (including the Armington model) yield the usual, unrealistically large estimates for the domestic welfare weight. We contend that the latter empirical paradox arises mainly because the explanatory variables tend to be extremely large for industries with low import ratios and/or low estimated elasticities or slopes resulting from relatively volatile import prices. The results with derived import parameters point to a much stronger role of campaign contributions within the PFS model than previously found. They also suggest that the commonly-used Armington estimates may not be appropriate for estimating the PFS model.

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Publisher Info
Paper provided by University of Connecticut, Food Marketing Policy Center in its series Research Reports with number 25195.

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Date of creation: 2005
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Handle: RePEc:ags:uconnr:25195

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Related research
Keywords: trade protection; tariffs; lobbying; political economy; food manufacturing; Agricultural and Food Policy; Political Economy; F13; F1; L66; C12;

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  1. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February. [Downloadable!] (restricted)
  2. Lopez, Rigoberto A., 2001. "Campaign Contributions and Agricultural Subsidies," Research Reports 25223, University of Connecticut, Food Marketing Policy Center. [Downloadable!]
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  3. Christine A. McDaniel & Edward J. Balistreri, 2003. "A Discussion on Armington Trade Substitution Elasticities," Computational Economics 0303002, EconWPA. [Downloadable!]
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  4. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
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  5. Pinelopi Koujianou Goldberg & Giovanni Maggi, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December. [Downloadable!] (restricted)
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  6. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Phillip McCalman, 2004. "Protection for Sale and Trade Liberalization: an Empirical Investigation," Review of International Economics, Blackwell Publishing, vol. 12(1), pages 81-94, 02. [Downloadable!] (restricted)
  8. Choi, E Kwan & Harrigan, James, 2004. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  9. Devashish Mitra, 1999. "Endogenous Lobby Formation and Endogenous Protection: A Long-Run Model of Trade Policy Determination," American Economic Review, American Economic Association, vol. 89(5), pages 1116-1134, December. [Downloadable!] (restricted)
  10. Xenia Matschke & Shane Sherlund, 2003. "Do Labor Issues Matter In The Determination Of U.S. Trade Policy? An Empirical Reevaluation," Santa Cruz Department of Economics, Working Paper Series 1029, Department of Economics, UC Santa Cruz. [Downloadable!]
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  11. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  12. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, EconWPA. [Downloadable!]
  13. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoglu, 2002. ""Protection For Sale" In A Developing Country: Democracy Vs. Dictatorship," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 497-508, August. [Downloadable!] (restricted)
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