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Food Protection for Sale

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Author Info

  • Rigoberto A. Lopez

    (University of Connecticut)

  • Xenia Matschke

    (University of Connecticut)

Abstract

This article tests the Protection for Sale (PFS) model using detailed data from U.S. food processing industries from 1978 to 1992 under alternative import demand specifications. All empirical results support the PFS model predictions and previous empirical work qualitatively. Although welfare weights are very sensitive to import demand specification, a surprising result is that we obtain weights between 2.6 and 3.6 for domestic welfare using import slopes or elasticities derived from domestic demand and supply functions. In contrast, results based on import slopes or elasticities from directly specified import demands (including the Armington model) yield the usual, unrealistically large estimates for the domestic welfare weight. We contend that the latter empirical paradox arises mainly because the explanatory variables tend to be extremely large for industries with low import ratios and/or low estimated elasticities or slopes resulting from relatively volatile import prices. The results with derived import parameters point to a much stronger role of campaign contributions within the PFS model than previously found. They also suggest that the commonly-used Armington estimates may not be appropriate for estimating the PFS model.

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Bibliographic Info

Paper provided by University of Connecticut, Department of Economics in its series Working papers with number 2005-13.

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Length: 28 pages
Date of creation: May 2005
Date of revision: Nov 2005
Handle: RePEc:uct:uconnp:2005-13

Note: Do not quote without permission. Funding from the CSREES Special Grant No. 2004-34178-13469 via the Food Marketing Policy Center and the Storrs Agricultural Experiment Station is gratefully acknowledged. The content of the paper, however, is the sole responsibility of the authors.
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Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063
Phone: (860) 486-4889
Fax: (860) 486-4463
Web page: http://www.econ.uconn.edu/
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Related research

Keywords: Trade protection; tariffs; lobbying; political economy; food manufacturing;

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References

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  1. Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
  2. Phillip McCalman, 2004. "Protection for Sale and Trade Liberalization: an Empirical Investigation," Review of International Economics, Wiley Blackwell, vol. 12(1), pages 81-94, 02.
  3. Matschke, Xenia N. & Sherlund, Shane M, 2003. "Do Labor Issues Matter In The Determination Of U.S. Trade Policy? An Empirical Reevaluation," Santa Cruz Department of Economics, Working Paper Series qt82k4x4f5, Department of Economics, UC Santa Cruz.
  4. Christine A. McDaniel & Edward J. Balistreri, 2003. "A Discussion on Armington Trade Substitution Elasticities," Computational Economics 0303002, EconWPA.
  5. Rigoberto A. Lopez, 2001. "Campaign Contributions and Agricultural Subsidies," Food Marketing Policy Center Research Reports 059, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
  6. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoglu, 2002. ""Protection For Sale" In A Developing Country: Democracy Vs. Dictatorship," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 497-508, August.
  7. Eric J. Bartelsman & Wayne Gray, 1996. "The NBER Manufacturing Productivity Database," NBER Technical Working Papers 0205, National Bureau of Economic Research, Inc.
  8. Pinelopi Koujianou Goldbe & Giovanni Maggi, 1997. "Protection for Sale: An Empirical Investigation," NBER Working Papers 5942, National Bureau of Economic Research, Inc.
  9. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, EconWPA.
  10. Choi, E. Kwan & Harrigan, James, 2003. "Handbook of International Trade," Staff General Research Papers 11375, Iowa State University, Department of Economics.
  11. Devashish Mitra, 1999. "Endogenous Lobby Formation and Endogenous Protection: A Long-Run Model of Trade Policy Determination," American Economic Review, American Economic Association, vol. 89(5), pages 1116-1134, December.
  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. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  14. Robert C. Feenstra, 1996. "U.S. Imports, 1972-1994: Data and Concordances," NBER Working Papers 5515, National Bureau of Economic Research, Inc.
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Citations

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Cited by:
  1. Fredriksson, Per & Mamun, Khawaja, 2009. "Tobacco Politics and Electoral Accountability in the United States," Working Papers 2009003, Sacred Heart University, John F. Welch College of Business.
  2. Kym Anderson & Gordon Rausser & Johan Swinnen, 2012. "Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets," Departmental Working Papers 2012-18, The Australian National University, Arndt-Corden Department of Economics.
  3. Xenia Matschke, 2005. "Costly Revenue-Raising and the Case for Favoring Import-Competing Industries," CESifo Working Paper Series 1502, CESifo Group Munich.
  4. Etienne Farvaque & Gael Lagadec, 2009. "Electoral Control when Policies are for Sale," CESifo Working Paper Series 2522, CESifo Group Munich.

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