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Protection for Sale: An Empirical Investigation

  • Giovanni Maggi
  • Pinelopi Koujianou Goldberg

The Grossman-Helpman "Protection for Sale" model, concerning the political economy of trade protection, yields clear predictions for the cross-sectional structure of import barriers. Our objective is to check whether the predictions of the Grossman-Helpman model are consistent with the data and, if the model finds support, to estimate its key structural parameters. We find that the pattern of protection in the United States in 1983 is broadly consistent with the predictions of the model. A surprising finding is that the weight of welfare in the government's objective function is many times larger than the weight of contributions.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 5 (December)
Pages: 1135-1155

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Handle: RePEc:aea:aecrev:v:89:y:1999:i:5:p:1135-1155
Note: DOI: 10.1257/aer.89.5.1135
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  1. Gene M. Grossman & Elhanan Helpman, 1993. "Trade Wars and Trade Talks," NBER Working Papers 4280, National Bureau of Economic Research, Inc.
  2. Jong-Wha Lee & Phillip Swagel, 1994. "Trade barriers and trade flows across countries and industries," International Finance Discussion Papers 476, Board of Governors of the Federal Reserve System (U.S.).
  3. Helpman, E., 1995. "Politics and Trade Policy," Papers 30-95, Tel Aviv - the Sackler Institute of Economic Studies.
  4. repec:oup:restud:v:63:y:1996:i:1:p:107-25 is not listed on IDEAS
  5. Edward E. Leamer, 1986. "Cross Section Estimation of the Effects of Trade Barriers," UCLA Economics Working Papers 417, UCLA Department of Economics.
  6. Ronald Findlay & Stanislaw Wellisz, 1982. "Endogenous Tariffs, the Political Economy of Trade Restrictions, and Welfare," NBER Chapters, in: Import Competition and Response, pages 223-244 National Bureau of Economic Research, Inc.
  7. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  8. repec:oup:qjecon:v:101:y:1986:i:1:p:1-31 is not listed on IDEAS
  9. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
  10. Giovanni Maggi & Andres Rodriguez-Clare, 1998. "Import Peneteration and the Politics of Trade Protection," NBER Working Papers 6711, National Bureau of Economic Research, Inc.
  11. Maddala,G. S., 1986. "Limited-Dependent and Qualitative Variables in Econometrics," Cambridge Books, Cambridge University Press, number 9780521338257.
  12. Goldberg, Pinelopi Koujianou, 1995. "Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry," Econometrica, Econometric Society, vol. 63(4), pages 891-951, July.
  13. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December.
  14. Ray, Edward John, 1981. "The Determinants of Tariff and Nontariff Trade Restrictions in the United States," Journal of Political Economy, University of Chicago Press, vol. 89(1), pages 105-21, February.
  15. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
  16. Shiells, C.R. & Stern, R.M. & Deardorff, A.V., 1988. "Estimates Of The Elasticities Of Substitution Between Imports And Home Goods For The United States: Reply," Working Papers 235, Research Seminar in International Economics, University of Michigan.
  17. repec:oup:restud:v:63:y:1996:i:2:p:265-86 is not listed on IDEAS
  18. 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.
  19. Pagan, Adrian & Vella, Frank, 1989. "Diagnostic Tests for Models Based on Individual Data: A Survey," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(S), pages S29-59, Supplemen.
  20. Chesher, Andrew & Irish, Margaret, 1987. "Residual analysis in the grouped and censored normal linear model," Journal of Econometrics, Elsevier, vol. 34(1-2), pages 33-61.
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