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Declining Industries and Political-Support Protectionist Motives

In: 40 Years of Research on Rent Seeking 2

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  • Arye L. Hillman

    (Bar Ilan University
    Monash University)

Abstract

Protection provided to declining industries is generally explained as founded in the judgement that specific factors, which do not have the opportunities for adjustment available to mobile factors, ought be cushioned against income losses due to falls in the world price of their industry’s output. The argument is that moral hazard causes private insurance markets for income maintenance to fail, so obligating governments to provide social insurance against income losses; or, alternatively, some form of altruistic notion of fairness is viewed as underlying protection of individuals’ incomes in face of exogenous change. Whether the social insurance or altruism view is taken, the authorities are seen as responding to social justice considerations in providing industries adversely affected by changes in world prices with compensating protection, at least temporarily to ease difficulties in adjustment—although the industry itself may influence the level and timing of protection by lobbying to make its plight known.

Suggested Citation

  • Arye L. Hillman, 2008. "Declining Industries and Political-Support Protectionist Motives," Springer Books, in: Roger D. Congleton & Kai A. Konrad & Arye L. Hillman (ed.), 40 Years of Research on Rent Seeking 2, pages 105-112, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-79247-5_5
    DOI: 10.1007/978-3-540-79247-5_5
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