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Politically Imposed Entry Barriers

Author

Listed:
  • Paul H. Rubin

    (Emory University)

  • Mark A. Cohen

    (Vanderbilt University)

Abstract

The antitrust agencies analyze consequences of proposed mergers assuming that imports are constrained by existing quotas, a second-best approach. This policy is flawed. Quotas are endogenous. If a merger allows firms to reduce output, the quota will be increased. If an industry has sufficient political power to obtain subsidies from government then the authorities should assume that these subsidies will be reduced if market power increases. Paradoxically, for political entry barriers truly in the public interest, the antitrust authorities should take the barrier as given. We provide evidence of a large adjustment of tariffs to changes in market power.

Suggested Citation

  • Paul H. Rubin & Mark A. Cohen, 1992. "Politically Imposed Entry Barriers," Eastern Economic Journal, Eastern Economic Association, vol. 18(3), pages 333-344, Summer.
  • Handle: RePEc:eej:eeconj:v:18:y:1992:i:3:p:333-344
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    File URL: http://web.holycross.edu/RePEc/eej/Archive/Volume18/V18N3P333_344.pdf
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    References listed on IDEAS

    as
    1. Richard E. Caves, 1976. "Economic Models of Political Choice: Canada's Tariff Structure," Canadian Journal of Economics, Canadian Economics Association, vol. 9(2), pages 278-300, May.
    2. Buchanan, James M & Lee, Dwight R, 1992. "Private Interest Support for Efficiency Enhancing Antitrust Policies," Economic Inquiry, Western Economic Association International, vol. 30(2), pages 218-224, April.
    3. Baumol, William J, 1982. "Contestable Markets: An Uprising in the Theory of Industry Structure," American Economic Review, American Economic Association, vol. 72(1), pages 1-15, March.
    4. Godek, Paul E, 1985. "Industry Structure and Redistribution through Trade Restrictions," Journal of Law and Economics, University of Chicago Press, vol. 28(3), pages 687-703, October.
    5. Bruce L. Benson & M. L. Greenhut, 1987. "Interest Groups and the Antitrust Paradox," Cato Journal, Cato Journal, Cato Institute, vol. 6(3), pages 801-817, Winter.
    6. Faith, Roger L & Leavens, Donald R & Tollison, Robert D, 1982. "Antitrust Pork Barrel," Journal of Law and Economics, University of Chicago Press, vol. 25(2), pages 329-342, October.
    7. Landes, William M & Posner, Richard A, 1975. "The Independent Judiciary in an Interest-Group Perspective," Journal of Law and Economics, University of Chicago Press, vol. 18(3), pages 875-901, December.
    8. Hazlett, Thomas W, 1992. "The Legislative History of the Sherman Act Re-examined," Economic Inquiry, Western Economic Association International, vol. 30(2), pages 263-276, April.
    9. Noam, Eli, 1984. "Market Power and Regulation: A Simultaneous Approach," Journal of Industrial Economics, Wiley Blackwell, vol. 32(3), pages 335-347, March.
    10. repec:cup:apsrev:v:71:y:1977:i:03:p:1026-1043_26 is not listed on IDEAS
    11. McKee, Michael & West, Edwin G, 1981. "The Theory of Second Best: A Solution in Search of a Problem," Economic Inquiry, Western Economic Association International, vol. 19(3), pages 436-448, July.
    12. Gary S. Becker, 1983. "A Theory of Competition Among Pressure Groups for Political Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 98(3), pages 371-400.
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    Citations

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    Cited by:

    1. Steven Globerman, 1990. "Trade liberalization and competitive behavior: A note assessing the evidence and the public policy implications," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 9(1), pages 80-88.

    More about this item

    Keywords

    Firm; Government; Import; Merger; Policy; Political; Quotas; Subsidies;

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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