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Food Protection for Sale

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  • Lopez, Rigoberto A.
  • Matschke, Xenia

Abstract

This article tests the Protection for Sale (PFS) model using detailed data from U.S. food processing industries from 1978 to 1992 under alternative import demand specifications. All empirical results support the PFS model predictions and previous empirical work qualitatively. Although welfare weights are very sensitive to import demand specification, a surprising result is that we obtain weights between 2.6 and 3.6 for domestic welfare using import slopes or elasticities derived from domestic demand and supply functions. In contrast, results based on import slopes or elasticities from directly specified import demands (including the Armington model) yield the usual, unrealistically large estimates for the domestic welfare weight. We contend that the latter empirical paradox arises mainly because the explanatory variables tend to be extremely large for industries with low import ratios and/or low estimated elasticities or slopes resulting from relatively volatile import prices. The results with derived import parameters point to a much stronger role of campaign contributions within the PFS model than previously found. They also suggest that the commonly-used Armington estimates may not be appropriate for estimating the PFS model.

Suggested Citation

  • Lopez, Rigoberto A. & Matschke, Xenia, 2005. "Food Protection for Sale," Research Reports 25195, University of Connecticut, Food Marketing Policy Center.
  • Handle: RePEc:ags:uconnr:25195
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    References listed on IDEAS

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    1. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
    2. Xenia Matschke & Shane M. Sherlund, 2006. "Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation," American Economic Review, American Economic Association, vol. 96(1), pages 405-421, March.
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    13. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
    14. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, University Library of Munich, Germany.
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    16. Devashish Mitra, 1999. "Endogenous Lobby Formation and Endogenous Protection: A Long-Run Model of Trade Policy Determination," American Economic Review, American Economic Association, vol. 89(5), pages 1116-1134, December.
    17. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoğlu, 2016. "“Protection For Sale” In A Developing Country: Democracy Vs. Dictatorship," World Scientific Book Chapters,in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 9, pages 163-174 World Scientific Publishing Co. Pte. Ltd..
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    Citations

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    Cited by:

    1. Yoto V. Yotov, 2010. "Trade-Induced Unemployment: How Much Do We Care?," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 972-989, November.
    2. Yoto V. Yotov, 2013. "Trade Adjustment, Political Pressure, And Trade Protection Patterns," Economic Inquiry, Western Economic Association International, vol. 51(3), pages 1867-1885, July.
    3. Anne-Célia Disdier & Frank van Tongeren, 2010. "Non-Tariff Measures in Agri-Food Trade: What Do the Data Tell Us? Evidence from a Cluster Analysis on OECD Imports," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(3), pages 436-455.
    4. Kym Anderson & Gordon Rausser & Johan Swinnen, 2013. "Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 423-477, June.
    5. Matschke, Xenia, 2008. "Costly revenue-raising and the case for favoring import-competing industries," Journal of International Economics, Elsevier, vol. 74(1), pages 143-157, January.
    6. Per G. Fredriksson & Khawaja A. Mamun, 2014. "Tobacco Politics and Electoral Accountability in the United States," Public Finance Review, , vol. 42(1), pages 4-34, January.
    7. Etienne Farvaque & Gael Lagadec, 2009. "Electoral Control when Policies are for Sale," CESifo Working Paper Series 2522, CESifo Group Munich.
    8. Changyuan Luo & Jun Zhang, 2010. "China Trade Policy Review: A Political Economy Approach," The World Economy, Wiley Blackwell, vol. 33(11), pages 1390-1413, November.
    9. Johan F.M.Swinnen & Thijs Vandemoortele, 2011. "On Butterflies and Frankenstein: A Dynamic Theory of Regulation," LICOS Discussion Papers 27611, LICOS - Centre for Institutions and Economic Performance, KU Leuven.

    More about this item

    Keywords

    Agricultural and Food Policy; Political Economy;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F1 - International Economics - - Trade
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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