Competition between opposing lobbies is an important factor in the endogenous determination of trade policy. This paper investigates empirically the consequences of lobbying competition between upstream and downstream producers for trade policy. The theoretical structure underlying the empirical analysis is the well-known Grossman-Helpman model of trade policy determination, modified suitably to account for the cross-sectoral use of inputs in production (itself a quantitatively significant phenomenon with around 50 percent of manufacturing output being used by other sectors rather than in final consumption). Data from more than 40 countries are used in our analysis. Our empirical results validate the predictions of the theoretical model with lobbying competition. Importantly, accounting for lobbying competition also alters substantially estimates of the "welfare-mindedness" of governments in setting trade policy.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
7305.
Find related papers by JEL classification: D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy-Making and Implementation F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations F14 - International Economics - - Trade - - - Country and Industry Studies of Trade
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