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Spurious Injury as Indirect Rent Seeking: Free Trade Under The Prospect of Protection

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Author Info

  • Leidy, M.P.
  • Hoekman, B.M.

Abstract

In 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 Info

Paper provided by Research Seminar in International Economics, University of Michigan in its series Working Papers with number 273.

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Length: 37 pages
Date of creation: 1991
Date of revision:
Handle: RePEc:mie:wpaper:273

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Postal: ANN ARBOR MICHIGAN 48109
Web page: http://www.fordschool.umich.edu/rsie/
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Keywords: free trade ; competition;

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Cited by:
  1. Nelson, Douglas, 2006. "The political economy of antidumping: A survey," European Journal of Political Economy, Elsevier, vol. 22(3), pages 554-590, September.
  2. Bernard Hoekman, 2004. "Policies Facilitating Firm Adjustment to Globalization," Oxford Review of Economic Policy, Oxford University Press, vol. 20(3), pages 457-473, Autumn.
  3. Greaney, Theresa M., 1999. "Manipulating market shares: The indirect effects of voluntary import expansions (VIEs)," Japan and the World Economy, Elsevier, vol. 11(1), pages 95-113, January.

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