The model of protectionist support for individual industries as an endogenous outcome of special interest politics pioneered by Grossman and Helpman (1994) is generalized and then empirically examined using data for a number of OECD countries and regions. Cross-sectional regressions are performed on the full sample,as well as on individual countries. The model generally holds up quite well to this empirical challenge. The estimates indicate that equilibrium ratios of special interest to general interest marginal utilities (with respect to protection levels) vary positively with protection levels as the theory has led us to expect. Terms of trade concerns seem important to the larger countries in our sample as implied by the present generalization of the GH model (as well as by the optimum tariff literature), but the influence of downstream interests does not come across in the estimates. The results seem robust also to inclusion of variables reflecting exogenous political concerns (indicated as relevant in other studies), although those bring a substantial addition to predictive power which strengthens the impression that (what is endogenously derived in) the GH model only captures a limited share of the considerations underlying trade policy decisions.
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Paper provided by Lund University, Department of Economics in its series Working Papers with number
2005:31.
Length: 46 pages Date of creation: 03 Jun 2004 Date of revision: Handle: RePEc:hhs:lunewp:2005_031
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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.
[Downloadable!] (restricted)
Other versions:
Gene M. Grossman & Elhanan Helpman, 1992.
"Protection For Sale,"
NBER Working Papers
4149, National Bureau of Economic Research, Inc.
[Downloadable!] (restricted)