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Lobbying Competition Over Trade Policy

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  • Kishore Gawande
  • Pravin Krishna
  • Marcelo Olarreaga

Abstract

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 trade policy. The theoretical structure underlying the empirical analysis is the well-known Grossman-Helpman model of trade policy determination, modified suitably to account for the cross-sectoral use of inputs in production (itself a quantitatively significant phenomenon with around 50 percent of manufacturing output being used by other sectors rather than in final consumption). Data from more than 40 countries are used in our analysis. Our empirical results validate the predictions of the theoretical model with lobbying competition. Importantly, accounting for lobbying competition also alters substantially estimates of the“welfare-mindedness” of governments in setting trade policy.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11371.

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Date of creation: May 2005
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Publication status: published as By Kishore Gawande & Pravin Krishna & Marcelo Olarreaga, 2012. "Lobbying Competition Over Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 115-132, 02.
Handle: RePEc:nbr:nberwo:11371

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  1. Douglas Staiger & James H. Stock, 1994. "Instrumental Variables Regression with Weak Instruments," NBER Technical Working Papers 0151, National Bureau of Economic Research, Inc.
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  9. Shiells, C.R. & Stern, R.M. & Deardorff, A.V., 1988. "Estimates Of The Elasticities Of Substitution Between Imports And Home Goods For The United States: Reply," Working Papers 235, Research Seminar in International Economics, University of Michigan.
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  12. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
  13. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
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  15. Freund, Caroline & Ozden, Caglar, 2004. "Loss aversion and trade policy," Policy Research Working Paper Series 3385, The World Bank.
  16. Bombardini, Matilde, 2008. "Firm heterogeneity and lobby participation," Journal of International Economics, Elsevier, vol. 75(2), pages 329-348, July.
  17. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
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Cited by:
  1. Alessandro Nicita & Marcelo Olarreaga & Peri Silva, 2013. "Cooperation in WTO's Tariff Waters," Research Papers by the Institute of Economics and Econometrics, Geneva School of Economics and Management, University of Geneva 13061, Institut d'Economie et Econométrie, Université de Genève.
  2. Dutt, Pushan & Mitra, Devashish, 2009. "Explaining Agricultural Distortion Patterns : The Roles of Ideology, Inequality, Lobbying and Public Finance," Agricultural Distortions Working Paper 50299, World Bank.
  3. Susumu Imai & Hajime Katayama & Kala Krishna, 2006. "Protection for Sale or Surge Protection?," NBER Working Papers 12258, National Bureau of Economic Research, Inc.
  4. Imai, Susumu & Katayama, Hajime & Krishna, Kala, 2009. "Is protection really for sale? A survey and directions for future research," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 181-191, March.
  5. Kim, Young-Han & Kim, Sang-Kee, 2012. "Welfare effects of competitive lobbying efforts in international oligopoly markets," Economic Modelling, Elsevier, vol. 29(3), pages 614-620.
  6. Marianna Belloc, 2007. "Protection for Sale in the EU," Working Papers 100, University of Rome La Sapienza, Department of Public Economics.
  7. Marvasi, Enrico, 2013. "Protection for Sale, Monopolistic Competition and Variable Markups," MPRA Paper 48511, University Library of Munich, Germany.
  8. Bombardini, Matilde, 2008. "Firm heterogeneity and lobby participation," Journal of International Economics, Elsevier, vol. 75(2), pages 329-348, July.
  9. Pokrivcak, Jan, 2007. "Economics and Political Economy of Regional Trade Agreements," Working Papers 7286, TRADEAG - Agricultural Trade Agreements.
  10. Prachi Mishra & Rodney D. Ludema & Anna Maria Mayda, 2010. "Protection for Free? the Political Economy of U.S. Tariff suspensions," IMF Working Papers 10/211, International Monetary Fund.
  11. Martimort, David & Semenov, Aggey, 2008. "Ideological Uncertainty and Lobbying Competition," MPRA Paper 6992, University Library of Munich, Germany.
  12. L. Montanari, 2008. "Foreign Aid and Policies under Asymmetric Information," Working Papers 642, Dipartimento Scienze Economiche, Universita' di Bologna.
  13. Nathan Nunn & Daniel Trefler, 2006. "Putting the Lid on Lobbying: Tariff Structure and Long-Term Growth when Protection is for Sale," NBER Working Papers 12164, National Bureau of Economic Research, Inc.

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