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Lobbying, corruption and “optimal” tariff

Author

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  • 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

    as
    1. Ivan Pastine & Tuvana Pastine, 2010. "Politician preferences, law-abiding lobbyists and caps on political contributions," Public Choice, Springer, vol. 145(1), pages 81-101, October.
    2. repec:wsi:wschap:9789813207615_0015 is not listed on IDEAS
    3. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August.
    4. James A. Brander & Barbara J. Spencer, 1981. "Tariffs and the Extraction of Foreign Monopoly Rents under Potential Entry," Canadian Journal of Economics, Canadian Economics Association, vol. 14(3), pages 371-389, August.
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    6. Tovar, Patricia, 2011. "Lobbying costs and trade policy," Journal of International Economics, Elsevier, vol. 83(2), pages 126-136, March.
    7. Jonathan Eaton & Gene M. Grossman, 1986. "Optimal Trade and Industrial Policy Under Oligopoly," The Quarterly Journal of Economics, Oxford University Press, vol. 101(2), pages 383-406.
    8. Daniel Knox & Martin Richardson, 2017. "Trade Policy and Parallel Imports," World Scientific Book Chapters,in: Dimensions of Trade Policy, chapter 15, pages 301-325 World Scientific Publishing Co. Pte. Ltd..
    9. Leonard F.S. Wang & Jen-yao Lee, 2010. "Partial Privatization, Foreign Competition, and Tariffs Ranking," Economics Bulletin, AccessEcon, vol. 30(3), pages 2405-2412.
    10. Dixit, Avinash, 1984. "International Trade Policy for Oligopolistic Industries," Economic Journal, Royal Economic Society, vol. 94(376a), pages 1-16, Supplemen.
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    12. Dixit, Avinash K & Kyle, Albert S, 1985. "The Use of Protection and Subsidies for Entry Promotion and Deterrence," American Economic Review, American Economic Association, vol. 75(1), pages 139-152, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Lobbying; Corruption; Tariff; F12; F13;

    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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