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Can we obtain realistic parameter estimates for the ‘protection for sale’ model?

In: The Political Economy of Trade Policy Theory, Evidence and Applications

Author

Listed:
  • Devashish Mitra
  • Dimitrios D. Thomakos
  • Mehmet Ulubaşoğlu

Abstract

In the Grossman and Helpman (1994) model of endogenous trade protection, sectoral lobbies try to influence an incumbent government that maximizes a weighted sum of political contributions and aggregate welfare. We empirically investigate this model using U.S. and Turkish data. Our specification is more tightly tied to theory than those in existing studies. Additionally, we assume all specific-factor owners to be organized into different lobbies. These changes, validated by hypothesis tests, yield more realistic parameter estimates of the government's concern for aggregate welfare and of the fraction of population organized into lobbies…

Suggested Citation

  • Devashish Mitra & Dimitrios D. Thomakos & Mehmet Ulubaşoğlu, 2016. "Can we obtain realistic parameter estimates for the ‘protection for sale’ model?," World Scientific Book Chapters,in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 10, pages 175-198 World Scientific Publishing Co. Pte. Ltd..
  • Handle: RePEc:wsi:wschap:9789814569156_0010
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    Cited by:

    1. Giovanni Facchini & Johannes Van Biesebroeck & Gerald Willmann, 2006. "Protection for sale with imperfect rent capturing," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 845-873, August.
    2. Giovanni Facchini & Marcelo Olarreaga & Peri Silva & Gerald Willmann, 2010. "Substitutability and Protectionism: Latin America's Trade Policy and Imports from China and India," World Bank Economic Review, World Bank Group, vol. 24(3), pages 446-473, June.
    3. Lai, Edwin L.-C. & Yan, Isabel K.M., 2013. "Would global patent protection be too weak without international coordination?," Journal of International Economics, Elsevier, vol. 89(1), pages 42-54.
    4. Baybars Karacaovali, 2015. "Varying Political Economy Weights of Protection: The Case of Colombia," Economics and Politics, Wiley Blackwell, vol. 27(2), pages 290-312, July.
    5. repec:bla:reviec:v:25:y:2017:i:1:p:21-43 is not listed on IDEAS
    6. Marianna Belloc, 2007. "Protection for Sale in the EU," Working Papers 100, University of Rome La Sapienza, Department of Public Economics.
    7. Imai, Susumu & Katayama, Hajime & Krishna, Kala, 2009. "Is protection really for sale? A survey and directions for future research," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 181-191, March.
    8. Etienne Farvaque & Gael Lagadec, 2009. "Electoral Control when Policies are for Sale," CESifo Working Paper Series 2522, CESifo Group Munich.
    9. Kato, Hayato, 2015. "Lobbying and Tax Competition in an Agglomeration Economy: A Reverse Home Market Effect," CCES Discussion Paper Series 56, Center for Research on Contemporary Economic Systems, Graduate School of Economics, Hitotsubashi University.
    10. Imai, Susumu & Katayama, Hajime & Krishna, Kala, 2009. "Protection for sale or surge protection?," European Economic Review, Elsevier, vol. 53(6), pages 675-688, August.
    11. Wilfred J. Ethier, 2013. "The Trade Agreement Embarrassment, Second Version," PIER Working Paper Archive 13-049, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 02 Sep 2013.
    12. Baybars Karacaovali, 2011. "Trade Policy Determinants and Trade Reform in a Developing Country," Fordham Economics Discussion Paper Series dp2011-03, Fordham University, Department of Economics.
    13. Rigoberto A. Lopez, 2008. "Does 'Protection for Sale' Apply to the US Food Industries?," Journal of Agricultural Economics, Wiley Blackwell, vol. 59(1), pages 25-40, February.
    14. Josh Ederington & Jenny Minier, 2008. "Reconsidering the empirical evidence on the Grossman-Helpman model of endogenous protection," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 501-516, May.
    15. Tasso Adamopoulos, 2008. "Land Inequality and the Transition to Modern Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(2), pages 257-282, April.
    16. Baybars Karacaovali, 2012. "Trade Policy Determinants and Trade Reform in a Developing Country: The Case of Colombia," Working Papers 201220R, University of Hawaii at Manoa, Department of Economics.
    17. Nathan Nunn & Daniel Trefler, 2006. "Putting the Lid on Lobbying: Tariff Structure and Long-Term Growth when Protection is for Sale," NBER Working Papers 12164, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Political Economy; Protection; Trade Policy; Tariffs; Subsidies; Reciprocal Trade Liberalization; Unilateral Trade Liberalization; Unilateralism; Reciprocity; Lobbying; Median Voter Models;

    JEL classification:

    • F0 - International Economics - - General
    • F6 - International Economics - - Economic Impacts of Globalization

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