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 US trade policy. The theoretical framework used is the well-known Grossman-Helpman model of trade policy determination suitably modified to account for the cross-sectoral use of inputs in production (the input-output matrix). Our empirical results, using US trade data, validate the predictions of the theoretical model with lobbying competition. Trade protection is found to be higher in industries with organized lobbies but lower when there are organized downstream users of the industry's output. Lobbying competition is additionally interesting as a candidate explanation for an empirical puzzle in the literature concerning the apparently nearly "welfare-maximizing" behavior of the US government in setting trade policy. Our estimates diminish the magnitude of the puzzle somewhat, but do not provide a full quantitative resolution of this question.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
11371.
Length: Date of creation: May 2005 Date of revision: Handle: RePEc:nbr:nberwo:11371
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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
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