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Lobbying, corruption and “optimal” tariff

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Listed:
  • Shih-shen Chen

  • Chu-Chuan Hsu

  • Chin-shu Huang

Abstract

This paper explores how a government officer enacts “optimum” import policy when confronting lobbies on trade policies from both domestic and foreign firms in a transition economy. Two results are found: firstly, if the inducement from the foreign firm on the government officer works, then the optimum tariff is negative, that is, import subsidy. However, this subsidy will turn to a positive tariff rate with the increasing lobbying inducement from domestic firms. Secondly, zero tariff duty is not an optimum choice under most circumstances. Besides, an asymmetric result is that when these two firms’ marginal costs are different, the optimum policy is to levy an import tariff on the one whose marginal cost is relatively small, while the other firm will get an import subsidy. Copyright Springer-Verlag 2013

Suggested Citation

  • Shih-shen Chen & Chu-Chuan Hsu & Chin-shu Huang, 2013. "Lobbying, corruption and “optimal” tariff," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(4), pages 375-386, December.
    • Handle: RePEc:spr:inrvec:v:60:y:2013:i:4:p:375-386
    DOI: 10.1007/s12232-012-0164-y
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    References listed on IDEAS

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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