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Protectionist demands in globalization

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  • Arzu Ilhan
  • Özgür Kibris

Abstract

This paper analyzes a small, open economy whose citizens have single-peaked preferences on the tariff rate for an import good. They publicly declare this rate to the government, which has discretion in implementing it. While the government has an incentive not to deviate too much from the publicly chosen tariff rate, its final choice is determined by bargaining with a foreign lobby that has a much lower optimal rate and offers monetary transfers in return for lower tariffs. The authors show that the expectation of foreign influence causes citizens to vote for a more protectionist tariff policy. Moreover, citizens’ behavior leads to an increase in transfers by the foreign lobby.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0006.

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Date of creation: 2000
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Handle: RePEc:fip:fedcwp:0006

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Keywords: Tariff ; Trade;

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  1. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
  2. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
  3. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  4. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
  5. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-18, May.
  6. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
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