Lobbying costs and trade policy
We study how endogenous lobbying costs influence trade policies. Although in practice lobbying expenditures far exceed campaign contributions, the literature on the political economy of trade policy has focused on the latter. In this paper we develop a model in which informational lobbying costs play a role in determining the structure of protection. In the model, special interest groups can choose to send a signal to the policymaker regarding some information they possess, and the policymaker observes the signal before setting the trade policies. We find that lobbying expenditures directly affect the equilibrium policies. In order to test the predictions of the model we collected data on lobbying expenditures from the Center for Responsible Politics as well as data on trade and industry characteristic variables for the United States from other sources. We perform a structural estimation of the equilibrium trade policies and find support for our model. The empirical evidence indicates that lobbying expenditures play an important role in explaining the variation of protection across sectors. Moreover, the model leads to considerably lower and more reasonable estimates of the weight that the government places on social welfare relative to political contributions.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Pinelopi Koujianou Goldberg & Giovanni Maggi, 1997.
"Protection for Sale: An Empirical Investigation,"
NBER Working Papers
5942, National Bureau of Economic Research, Inc.
- Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2004.
"Import Demand Elasticities and Trade Distortions,"
CEPR Discussion Papers
4669, C.E.P.R. Discussion Papers.
- Susumu Imai & Hajime Katayama & Kala Krishna, 2006.
"Protection for Sale or Surge Protection?,"
NBER Working Papers
12258, National Bureau of Economic Research, Inc.
- John M. de Figueiredo & Charles M. Cameron, 2006. "Endogenous Cost Lobbying: Theory and Evidence," Hi-Stat Discussion Paper Series d05-156, Institute of Economic Research, Hitotsubashi University.
- Kee, Hiau Looi & Nicita, Alessandro & Olarreaga, Marcelo, 2006.
"Estimating Trade Restrictiveness Indices,"
CEPR Discussion Papers
5576, C.E.P.R. Discussion Papers.
- Veugelers, Reinhilde, 1989. "Wage premia, price-cost margins and bargaining power in Belgian manufacturing," European Economic Review, Elsevier, vol. 33(1), pages 169-180, January.
- Grossman, Gene M & Helpman, Elhanan, 1994.
"Protection for Sale,"
American Economic Review,
American Economic Association, vol. 84(4), pages 833-50, September.
- Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 21-92, Tel Aviv.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Potters, Jan & van Winden, Frans, 1992. "Lobbying and Asymmetric Information," Public Choice, Springer, vol. 74(3), pages 269-92, October.
- Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-60, February.
- Ellen Brock & Sabien Dobbelaere, 2006.
"Has International Trade Affected Workers’ Bargaining Power?,"
Review of World Economics (Weltwirtschaftliches Archiv),
Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(2), pages 233-266, July.
- Ellen Brock & Sabien Dobbelaere, 2003. "Has International Trade Affected Workers?Bargaining Power?," LICOS Discussion Papers 13603, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- Morten Bennedsen & Sven E. Feldmann, 2002.
Journal of Political Economy,
University of Chicago Press, vol. 110(4), pages 919-948, August.
- Morten Bennedsen & Sven E. Feldmann, 2000. "Lobbying Legislatures," CIE Discussion Papers 2000-04, University of Copenhagen. Department of Economics. Centre for Industrial Economics.
- Bennedsen, Morten & Feldmann, Sven E., 2000. "Lobbying Legislatures," Working Papers 07-2000, Copenhagen Business School, Department of Economics.
- Michel Dumont & Glenn Rayp & Peter Willemé, 2006. "Does internationalization affect union bargaining power? An empirical study for five EU countries," Oxford Economic Papers, Oxford University Press, vol. 58(1), pages 77-102, January.
- 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.
- Milyo Jeffrey, 2002. "Bribes and Fruit Baskets: What Does the Link Between PAC Contributions and Lobbying Mean?," Business and Politics, De Gruyter, vol. 4(2), pages 1-4, August.
- Doiron, Denise J, 1992. "Bargaining Power and Wage-Employment Contracts in a Unionized Industry," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(3), pages 583-606, August.
- 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.
- Tripathi Micky & Ansolabehere Stephen & Jr James M. Snyder, 2002. "Are PAC Contributions and Lobbying Linked? New Evidence from the 1995 Lobby Disclosure Act," Business and Politics, De Gruyter, vol. 4(2), pages 1-26, August.
- Gawande, Kishore, 1997. "Generated regressors in linear and nonlinear models," Economics Letters, Elsevier, vol. 54(2), pages 119-126, February.
When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:83:y:2011:i:2:p:126-136. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.