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Negotiated Trade Restrictions with Private Political Pressure

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Author Info
Robert C. Feenstra
Tracy R. Lewis

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Abstract

In this paper we consider a home government with political pressure to restrict trade, at the expense of foreigners. The foreign country is compensated with an income transfer, which can be thought of as a portion of the tariff revenues or quota rents. In this setting the two countries should negotiate over the level of tariff and transfer of rents, depending on the level of political pressure at home. However, if this pressure cannot be directly observed abroad, then the home country may have an incentive to claim arbitrarily high political need and seek corresponding high trade barriers . We resolve this problem by determining incentive compatible trade policies, in which the home government has no incentive to overstate (or understate) the political pressure for protection.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2374.

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Date of creation: Aug 1987
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Publication status: published as Quarterly Journal of Economics, November 1991, 1287-1307
Handle: RePEc:nbr:nberwo:2374

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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.:
  1. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January. [Downloadable!] (restricted)
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  2. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December. [Downloadable!] (restricted)
  3. Mayer, Wolfgang & Riezman, Raymond G., 1987. "Endogenous choice of trade policy instruments," Journal of International Economics, Elsevier, vol. 23(3-4), pages 377-381, November. [Downloadable!] (restricted)
  4. Wellisz, Stanislaw & Wilson, John D., 1986. "Lobbying and tariff formation: A deadweight loss consideration," Journal of International Economics, Elsevier, vol. 20(3-4), pages 367-375, May. [Downloadable!] (restricted)
  5. Young, Leslie & Magee, Stephen P, 1986. "Endogenous Protection, Factor Returns and Resource Allocation," Review of Economic Studies, Blackwell Publishing, vol. 53(3), pages 407-19, July. [Downloadable!] (restricted)
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(explanations, 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.)

  1. Philip I. Levy, 2003. "Non-Tariff Barriers as a Test of Political Economy Theories," Working Papers 852, Economic Growth Center, Yale University. [Downloadable!]
  2. Robert Feenstra & Tracy R. Lewis, 1990. "Distributing the Gains from Trade With Incomplete Information," NBER Working Papers 3277, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Kyle Bagwell & Robert W. Staiger, 1989. "A Theory of Managed Trade," Discussion Papers 801, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
    Other versions:
  4. Calzolari, Giacomo & Lóránth, Gyöngyi, 2004. "Regulation of Multinational banks: A Theoretical Inquiry," CEPR Discussion Papers 4232, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "Import Peneteration and the Politics of Trade Protection," NBER Working Papers 6711, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  6. Dan Kovenock & Marie Thursby, 1992. "GATT, Dispute Settlement and Cooperation," NBER Working Papers 4071, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Georg Noldeke & Larry Samuelson, 2004. "Decomposable Principal-Agent Problems," Microeconomics 0410004, EconWPA. [Downloadable!]
  8. Thomas J. Prusa & Dobrin Kolev, 1999. "Dumping and Double Crossing: The (In)Effectiveness Of Cost-Based Trade Policy Under Incomplete Information," Departmental Working Papers 199901, Rutgers University, Department of Economics. [Downloadable!]
  9. Davide Sala, 2007. "RTAs Formation and Trade Policy," Economics Working Papers ECO2007/59, European University Institute. [Downloadable!]
  10. Robert C. Feenstra, 1989. "Auctioning U.S. Import Quotas, Foreign Response, and Alternative Policies," NBER Working Papers 2839, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Tadashi Ito, 2007. "NAFTA and productivity convergence between Mexico and the US," HEI Working Papers 26-2007, Economics Section, The Graduate Institute of International Studies, revised 27 Nov 2007. [Downloadable!]
  12. Georg Noldeke & Larry Samuelson, 2006. "Optimal Bunching without Optimal Control," Levine's Bibliography 784828000000000502, UCLA Department of Economics. [Downloadable!]
    Other versions:
  13. Robert C. Feenstra & Tracy R. Lewis & John McMillan, 1990. "Designing Policies to Open Trade," NBER Working Papers 3258, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  14. Alberto Martin & Wouter Vergote, 2005. "On the Role of Retaliation in Trade Agreements," Economics Working Papers 914, Department of Economics and Business, Universitat Pompeu Fabra, revised Apr 2008. [Downloadable!]
    Other versions:
  15. Horn, Henrik & Mavroidis, Petros C, 2001. "Economic and Legal Aspects of the Most Favoured Nation Clause," CEPR Discussion Papers 2859, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  16. repec:att:wimass:1920423 is not listed on IDEAS
  17. Martin, Alberto & Vergote, Wouter, 2004. "Antidumping: Welfare Enhancing Retaliation?," MPRA Paper 5416, University Library of Munich, Germany. [Downloadable!]
  18. Kyle Bagwell & Robert W. Staiger, 2004. "Enforcement, Private Political Pressure and the GATT/WTO Escape Clause," NBER Working Papers 10987, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  19. Dobrin R. Kolev & Thomas J. Prusa, 1999. "Dumping and Double Crossing: The (In)Effectiveness of Cost-Based Trade Policy Under Incomplete Information," NBER Working Papers 6986, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  20. Richard A. Jensen & Marie Thursby, 1990. "Tariffs with Private Information and Reputation," NBER Working Papers 2959, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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