Declining Industries and Persistent Tariff Protection
The paper uses a political economy framework to explain the empirical observation that trade protection is persistent. The assumptions that are shown to generate endogenous tariff persistence in the model are quite plausible: agents are uncertain about future prices, tariffs are affected by political pressure, and producers of the import-competing good own sector-specific human capital that may be lost if they exit the industry. The model also reveals that, under the conditions listed above, industries decline gradually in response to a price shock even when producers do not face increasing costs of adjustment. Copyright 2002 by Blackwell Publishing Ltd.
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Volume (Year): 10 (2002)
Issue (Month): 4 (November)
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