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Searching for the (dark) forces behind protection


  • Hadi Salehi Esfahani


This paper re-examines the determinants of trade policy. It modifies the Grossman--Helpman model of trade policy to take account of factors besides lobby contributions that may lead politicians to value rents differently across industries. The idea is motivated by the puzzling results of the recent empirical work on the Grossman--Helpman model. The empirical work in the paper based on US data confirms that lobby contributions do not play obvious roles in trade policy. Rather, trade policies seem to be placing higher weights on the earnings of industries where lower skill workers and smaller, less capital intensive firms are more prevalent. It is argued that this can be explained by the credit and insurance constraints that such agents tend to face. The weakness of lobby contributions in predicting protectionism across industries may be due to the variety of alternative goals that lobbies pursue and the diversity of interests within each industry. Also, the industries with well-organized and well-funded lobbies may have easier access to more efficient fiscal and financial transfers. The approach adopted in this paper paves the way for examining a variety of determinants of trade policy in a broader framework. The regularities observed here have far-reaching implications for the pattern and evolution of trade policies. Copyright 2005, Oxford University Press.

Suggested Citation

  • Hadi Salehi Esfahani, 2005. "Searching for the (dark) forces behind protection," Oxford Economic Papers, Oxford University Press, vol. 57(2), pages 283-314, April.
  • Handle: RePEc:oup:oxecpp:v:57:y:2005:i:2:p:283-314

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    Cited by:

    1. Giovanni Facchini & Johannes Van Biesebroeck & Gerald Willmann, 2006. "Protection for sale with imperfect rent capturing," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 845-873, August.
    2. Sonia Naccache, 2008. "The Political Economy of Trade Policy in Tunisia," Working Papers 438, Economic Research Forum, revised 09 Jan 2008.
    3. Ferdinand Eibl & Adeel Malik, 2016. "The Politics of Partial Liberalization: Cronyism and Non-Tariff Protection in Mubarak's Egypt," CSAE Working Paper Series 2016-27, Centre for the Study of African Economies, University of Oxford.
    4. Yoto V. Yotov, 2013. "Trade Adjustment, Political Pressure, And Trade Protection Patterns," Economic Inquiry, Western Economic Association International, vol. 51(3), pages 1867-1885, July.
    5. Philipp Maier, 2008. "A Wave of Protectionism? An Analysis of Economic and Political Considerations," Staff Working Papers 08-2, Bank of Canada.
    6. Esfahani, Hadi Salehi & Squire, Lyn, 2007. "Explaining trade policy in the Middle East and North Africa," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(5), pages 660-684, February.
    7. repec:wsi:medjxx:v:01:y:2009:i:01:n:s1793812009000048 is not listed on IDEAS

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