Trade Policy with Intermediate Uses of Goods
We show that input-output linkages are important when trade policies and political contributions are determined by special interest politics as in the standard model of “protection for sale”. The ability of industry-specific special interests to bid for lower input prices implies that net rather than gross output is what matters to the level of protection enjoyed by an industry and ex-plains the empirical regularity of tariff escalation. Furthermore, stronger input-output linkages imply greater incentives to organize and stronger competition for policy favors and therefore larger aggregate political contributions in return for a given policy.
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Volume (Year): 93 (2003)
Issue (Month): 1 (January-February)
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