This paper studies whether political campaign contributions influence agricultural protection in the United States in the manner suggested by the political economy model of Grossman and Helpman (1994), using a detailed cross-sectional data set of agricultural protection, subsidies, and contributions to Political Action Committees in the late 1990s. The data do not reject the qualitative predictions of the model: that policymakers will consider both the wishes of specific lobbies and the interests of society as a whole in their decisions. However, the estimated weight of lobbying contributions in decision-making (actual policy) is found to be very low. This is a puzzle as it seems to suggest irrational behavior on the part of the lobbies that make political contributions. It is also inconsistent with the large estimates of deadweight losses from distortionary policy in agriculture. We show that the puzzle can be resolved by extending the model to allow uncertainty about the ability of politicians to deliver policy combined with the fact that contributions are made before policy is decided. The results of the analysis illustrate that the underpinnings of the prevailing political economy equilibrium that supports restrictive agricultural trade policies will be difficult to dislodge in the absence of mobilizing strong counter-lobbying to induce a more liberal policy stance. This of course is one rationale for international trade negotiations - but it requires that other groups in society see enough of an incentive to engage in the political process, pointing to the importance of the design of the negotiating agenda.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
5634.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Grossman, Gene M & Helpman, Elhanan, 1994.
"Protection for Sale,"
American Economic Review,
American Economic Association, vol. 84(4), pages 833-50, September.
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Gene M. Grossman & Elhanan Helpman, 1992.
"Protection For Sale,"
NBER Working Papers
4149, National Bureau of Economic Research, Inc.
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