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Protection for Sale Under Monopolistic Competition: An Empirical Investigation

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Listed:
  • Pao-Li Chang

    (School of Economics and Social Sciences, Singapore Management University)

  • Myoung-jae Lee

    (Korea University, Seoul, Korea)

Abstract

This paper proposes a general empirical framework to estimate the protection-for-sale model, where the protection regime shifts according to a sector's market structure (perfectly or monop-olistically competitive). We base the protection structure on Grossman and Helpman (1994) for the subset of perfectly competitive sectors and on Chang (2005) for the subset of monop- olistically competitive sectors. The two protection regimes are simultaneously estimated with joint constraints. The results of the J-test consistently reject the homogeneous (perfect compe- tition) protection-for-sale model often adopted in previous literature and suggest a direction of improvement toward the proposed heterogeneous protection structure model.

Suggested Citation

  • Pao-Li Chang & Myoung-jae Lee, 2006. "Protection for Sale Under Monopolistic Competition: An Empirical Investigation," Working Papers 18-2006, Singapore Management University, School of Economics.
    • Handle: RePEc:siu:wpaper:18-2006
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    References listed on IDEAS

    as
    1. 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.
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    7. Chang, Pao-Li, 2005. "Protection for sale under monopolistic competition," Journal of International Economics, Elsevier, vol. 66(2), pages 509-526, July.
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    More about this item

    Keywords

    endogenous trade policy; campaign contribution; monopolistic competition; intrain- dustry trade; import penetration;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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