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Spurious Injury As Indirect Rent Seeking: Free Trade Under The Prospect Of Protection

  • Michael P. Leidy
  • Bernard M. Hoekman

In the literature on directly unproductive profit seeking or rent seeking, intervention-seeking by labor and industry groups is generally restricted to direct lobbying activity. However, import-competing producers may have an additional instrument to influence the decision to grant protection. Under well-established injury criteria for protection import-competing producers have an incentive, either collectively or individually, to feign injury. To the extent that the free-rider problem can be overcome, orchestrating the appearance of injury is an intervention-seeking activity that may be complementary to DUP lobbying. When the established indicators of industry well-being include variables controlled by the prospective beneficiaries, therefore, free trade under the prospect of protection is potentially accompanied by a concomitant spurious-injury distortion. Some of the positive and welfare implications of the theory of spurious injury are investigated in both a partial equilibrium framework and in the Heckscher-Ohlin model. Copyright 1991 Blackwell Publishers Ltd..

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Article provided by Wiley Blackwell in its journal Economics & Politics.

Volume (Year): 3 (1991)
Issue (Month): 2 (07)
Pages: 111-137

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Handle: RePEc:bla:ecopol:v:3:y:1991:i:2:p:111-137
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