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India's Trade Policy For Sale: How Much? Who Buys?

Author

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  • Cadot, Olivier
  • Olarreaga, Marcelo
  • Grether, Jean-Marie

Abstract

This Paper proposes a new method to test the Grossman-Helpman model of endogenous protection and lobby formation. This method, which does not require outside data on lobbies or contributions, identifies politically organized industries for trade protection purposes and calculates equilibrium contributions directly from the model using structural parameter estimates. Its emphasis on vertical inter-industry linkages makes it also possible to trace the effects of duty drawbacks and counter-lobbying from downstream users on endogenous protection. Applied to India, it yields results that are qualitatively consistent with the model?s predictions and that seem quantitatively more plausible than estimates given for the US by alternative methods. The weight on social welfare in the government?s objective function is 5, and the average contribution per ISIC sector is $33 million.

Suggested Citation

  • Cadot, Olivier & Olarreaga, Marcelo & Grether, Jean-Marie, 2003. "India's Trade Policy For Sale: How Much? Who Buys?," CEPR Discussion Papers 4168, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4168
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    Citations

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    Cited by:

    1. Francois, Joseph & Nelson, Douglas & Pelkmans-Balaoing, Annette, 2008. "Endogenous Protection in General Equilibrium: Estimating Political Weights in the EU," CEPR Discussion Papers 6979, C.E.P.R. Discussion Papers.
    2. Stoyanov, Andrey & Yildiz, Halis Murat, 2015. "Preferential versus multilateral trade liberalization and the role of political economy," European Economic Review, Elsevier, vol. 80(C), pages 140-164.
    3. 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.
    4. Damania, Richard & Fredriksson, Per G., 2007. "Trade policy: What's welfare got to do with it?," Economics Letters, Elsevier, vol. 96(1), pages 64-69, July.
    5. Hélène Ehrhart, 2011. "Assessing the relationship between democracy and domestic taxes in developing countries," CERDI Working papers halshs-00553607, HAL.
    6. Puja Vasudeva Dutta, 2004. "Trade Protection and Inter-industry Wages in India," PRUS Working Papers 27, Poverty Research Unit at Sussex, University of Sussex.
    7. Helene Ehrhart, 2012. "Assessing the relationship between democracy and domestic taxes in developing countries," Economics Bulletin, AccessEcon, vol. 32(1), pages 551-566.

    More about this item

    Keywords

    India; Political economy; Protection;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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