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Lobbying Competition Over Trade Policy

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  • By Kishore Gawande
  • Pravin Krishna
  • Marcelo Olarreaga

Abstract

Competition between opposing lobbies is an important factor in the endogenous determination of trade policy. This paper investigates empirically the consequences of lobbying competition between upstream and downstream producers for trade policy. The theoretical structure underlying the empirical analysis is the well-known Grossman-Helpman model of trade policy determination, modified suitably to account for the cross-sectoral use of inputs in production (itself a quantitatively significant phenomenon with around 50 percent of manufacturing output being used by other sectors rather than in final consumption). Data from more than 40 countries are used in our analysis. Our empirical results validate the predictions of the theoretical model with lobbying competition. Importantly, accounting for lobbying competition also alters substantially estimates of the"welfare-mindedness" of governments in setting trade policy.
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Suggested Citation

  • By Kishore Gawande & Pravin Krishna & Marcelo Olarreaga, 2012. "Lobbying Competition Over Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 115-132, February.
  • Handle: RePEc:wly:iecrev:v:53:y:2012:i:1:p:115-132
    DOI: j.1468-2354.2011.00673.x
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    File URL: http://hdl.handle.net/10.1111/j.1468-2354.2011.00673.x
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    References listed on IDEAS

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    More about this item

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • 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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