The Political Economy of Declining Industries: Senescent Industry Collapse Revisited
AbstractOne of the most robust empirical regularities in the political economy of trade is the persistence of protection. This paper explains persistent protection in terms of the interaction between industry adjustment, lobbying, and the political response. Faced with a trade shock, owners of industry-specific factors can undertake costly adjustment, or they can lobby politicians for protection and thereby mitigate the need for adjustment. The choice depends on the returns from adjusting relative to lobbying. By introducing an explicit lobbying process, it can be shown that the level of tariffs is an increasing function of past tariffs. Since current adjustment diminishes future lobbying intensity, and protection reduces adjustment, current protection raises future protection. This simple lobbying feedback effect has an important dynamic resource allocation effect: declining industries contract more slowly over time and never fully adjust. In addition, the model makes clear that the type of collapse predicted by Cassing and Hillman (1986) is only possible under special conditions, such as a fixed cost to lobbying. The paper also considers the symmetric case of lobbying in growing industries.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4606.
Date of creation: Dec 1993
Date of revision:
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
Other versions of this item:
- Brainard, S. Lael & Verdier, Thierry, 1997. "The political economy of declining industries: Senescent industry collapse revisited," Journal of International Economics, Elsevier, vol. 42(1-2), pages 221-237, February.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
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.:
- Braillard, S. Lael & Verdier, Thierry, 1994. "Lobbying and adjustment in declining industries," European Economic Review, Elsevier, vol. 38(3-4), pages 586-595, April.
- Gene M. Grossman & Elhanan Helpman, 1992.
"Protection For Sale,"
NBER Working Papers
4149, National Bureau of Economic Research, Inc.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Pugel, Thomas A & Walter, Ingo, 1985. "U.S. Corporate Interests and the Political Economy of Trade Policy," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 465-73, August.
- Colin Lawrence & Robert Z. Lawrence, 1985. "Manufacturing Wage Dispersion: An End Game Interpretation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 16(1), pages 47-116.
- Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
- Brainard, S Lael, 1994. "Last One Out Wins: Trade Policy in an International Exit Game," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(1), pages 151-72, February.
- Brainard, S. Lael & Verdier, Thierry, 1997.
"The political economy of declining industries: Senescent industry collapse revisited,"
Journal of International Economics,
Elsevier, vol. 42(1-2), pages 221-237, February.
- S. Lael Brainard & Thierry Verdier, 1993. "The Political Economy of Declining Industries: Senescent Industry Collapse Revisited," NBER Working Papers 4606, National Bureau of Economic Research, Inc.
- Matsuyama, Kiminori, 1990.
"Perfect Equilibria in a Trade Liberalization Game,"
American Economic Review,
American Economic Association, vol. 80(3), pages 480-92, June.
- Marvel, Howard P & Ray, Edward J, 1983. "The Kennedy Round: Evidence on the Regulation of International Trade in the United States," American Economic Review, American Economic Association, vol. 73(1), pages 190-97, March.
- Cassing, James H & Hillman, Arye L, 1986. "Shifting Comparative Advantage and Senescent Industry Collapse," American Economic Review, American Economic Association, vol. 76(3), pages 516-23, June.
- Van Long, Ngo & Vousden, Neil, 1991. "Protectionist responses and declining industries," Journal of International Economics, Elsevier, vol. 30(1-2), pages 87-103, February.
- Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.