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Import Peneteration and the Politics of Trade Protection

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  • Giovanni Maggi
  • Andres Rodriguez-Clare

Abstract

In this paper we reconsider a key empirical prediction generated by an important class of political-economy models of trade policy, namely that trade protection should be higher in sectors characterized by lower import penetration (we call this the little support for this prediction. In this paper we argue that the standard prediction depends critically on the assumptions that trade taxes are the only policy instruments and that the government has access to non-distortionary taxation. We analyze a model in which the government can use quotas and VERs in addition to trade taxes and raising public funds may be costly. Under a simple sufficient condition, our model predicts that the protection level increases with import penetration, both in sectors that are protected with tariffs and in sectors that are protected with quantitative restrictions.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6711.

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Date of creation: Aug 1998
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Publication status: published as Maggi, Giovanni and Andres Rodriguez-Clare. "Import Penetration And The Politics Of Trade Protection," Journal of International Economics, 2000, v51(2,Aug), 287-304.
Handle: RePEc:nbr:nberwo:6711

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  1. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, American Economic Association, vol. 78(4), pages 719-45, September.
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  8. Ronald Findlay & Stanislaw Wellisz, 1982. "Endogenous Tariffs, the Political Economy of Trade Restrictions, and Welfare," NBER Chapters, National Bureau of Economic Research, Inc, in: Import Competition and Response, pages 223-244 National Bureau of Economic Research, Inc.
  9. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 101(1), pages 138-60, February.
  10. Rosendorff, B Peter, 1996. "Voluntary Export Restraints, Antidumping Procedure, and Domestic Politics," American Economic Review, American Economic Association, American Economic Association, vol. 86(3), pages 544-61, June.
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  12. Borrell, Brent & Maw-Cheng Yang, 1992. "EC Bananarama 1992 : the sequel - the EC Commission proposal," Policy Research Working Paper Series, The World Bank 958, The World Bank.
  13. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers, C.E.P.R. Discussion Papers 827, C.E.P.R. Discussion Papers.
  14. Baldwin, Richard, 1987. "Politically realistic objective functions and trade policy PROFs and tariffs," Economics Letters, Elsevier, Elsevier, vol. 24(3), pages 287-290.
  15. Feenstra, Robert C & Lewis, Tracy R, 1991. "Negotiated Trade Restrictions with Private Political Pressure," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 106(4), pages 1287-307, November.
  16. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, Elsevier, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
  17. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, American Economic Association, vol. 89(5), pages 1135-1155, December.
  18. Robert C. Feenstra, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 6(3), pages 159-178, Summer.
  19. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, American Economic Association, vol. 72(5), pages 1180-87, December.
  20. Levy, Philip I., 1999. "Lobbying and international cooperation in tariff setting," Journal of International Economics, Elsevier, Elsevier, vol. 47(2), pages 345-370, April.
  21. Anderson, Kym, 1980. "The Political Market for Government Assistance to Australian Manufacturing Industries," The Economic Record, The Economic Society of Australia, The Economic Society of Australia, vol. 56(153), pages 132-44, June.
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