Spurious Injury as Indirect Rent Seeking: Free Trade Under The Prospect of Protection
AbstractIn the literature on directly unproductive profit seeking or rent seeking, intervention-seeking by labor and industry groups is generally restricted to direct lobbying activity. However, import-competing producers may have an additional instrument to influence the decision to grant protection. Under well-established injury criteria for protection import-competing producers have an incentive, either collectively or individually, to feign injury. To the extent that the free-rider problem can be overcome, orchestrating the appearance of injury is an intervention-seeking activity that may be complementary to DUP lobbying. When the established indicators of industry well-being include variables controlled by the prospective beneficiaries, therefore, free trade under the prospect of protection is potentially accompanied by a concomitant spurious-injury distortion. Some of the positive and welfare implications of the theory of spurious injury are investigated in both a partial equilibrium framework and in the Heckscher-Ohlin model. Copyright 1991 Blackwell Publishers Ltd..
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Bibliographic InfoPaper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 273.
Length: 37 pages
Date of creation: 1991
Date of revision:
free trade ; competition;
Other versions of this item:
- Michael P. Leidy & Bernard M. Hoekman, 1991. "Spurious Injury As Indirect Rent Seeking: Free Trade Under The Prospect Of Protection," Economics and Politics, Wiley Blackwell, vol. 3(2), pages 111-137, 07.
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