Endogenous Protection in General Equilibrium: Estimating Political Weights in the EU
We examine the political economy underpinnings of import protection in general equilibrium. Starting from a dual theoretical representation of production, trade, and consumption, we map a general representation of the real economy to underlying political processes - aka the political support function - to derive a general representation of the determinants of import protection. This includes the relatively standard approach of examining the pattern of tariffs in a Grossman-Helpman framework, as well as recent extensions linked to upstream and downstream linkages between sectors. Because we start from a relatively generic general equilibrium model of production, we have an immediate bridge between the theory and general equilibrium-based estimates of the welfare effects and rents generated by tariffs. We therefore follow the development of our generalized theoretical framework by introducing the use of general equilibrium estimates of the direct and indirect marginal impacts of protection at the sector level for econometric estimation of the revealed pattern of policy weights. This GE approach yields direct estimates of political weights based on economic effects, including cross-industry effects. The resulting weights lend insight into relative protection of agriculture and manufacturing. Working with data on the European union, we find that the strength of downstream linkages matters for policy weights and rates of protection, as does the national posture of industry. We also find support for a general political support function in the determination of tariffs, though results are mixed for the more narrow Grossman-Helpman specification. In the EU, nationality of industry seems to play a role in the setting of Community-wide import protection.
|Date of creation:||Oct 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999.
"Protection for Sale: An Empirical Investigation,"
American Economic Review,
American Economic Association, vol. 89(5), pages 1135-1155, December.
- Patrick A. Messerlin, 2001. "Measuring the Costs of Protection in Europe: European Commercial Policy in the 2000s," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 102, January.
- Grossman, G.M. & Helpman, E., 1992.
"Protection for Sale,"
21-92, Tel Aviv.
- Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
- Gene M. Grossman & Elhanan Helpman, 1992. "Protection For Sale," NBER Working Papers 4149, National Bureau of Economic Research, Inc.
- Grossman, G.M. & Helpman, E., 1992. "Protection for Sale," Papers 162, Princeton, Woodrow Wilson School - Public and International Affairs.
- Grossman, G.M. & Helpman, E., 1993.
"The Politics of Free Trade Agreements,"
14-93, Tel Aviv.
- Grossman, Gene & Helpman, Elhanan, 1994. "The Politics of Free Trade Agreements," CEPR Discussion Papers 908, C.E.P.R. Discussion Papers.
- Grossman, G.M. & Helpman, E., 1993. "The Politics of Free Trade Agreements," Papers 166, Princeton, Woodrow Wilson School - Public and International Affairs.
- Gene M. Grossman & Elhanan Helpman, 1993. "The Politics of Free Trade Agreements," NBER Working Papers 4597, National Bureau of Economic Research, Inc.
- Constantopoulos, Maria, 1974. "Labour protection in Western Europe," European Economic Review, Elsevier, vol. 5(4), pages 313-328, December.
- Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-60, February.
- Anderson, Kym, 1980. "The Political Market for Government Assistance to Australian Manufacturing Industries," The Economic Record, The Economic Society of Australia, vol. 56(153), pages 132-44, June.
- Jong-Wha Lee & Phillip Swagel, 1994.
"Trade Barriers and Trade Flows across Countries and Industries,"
NBER Working Papers
4799, National Bureau of Economic Research, Inc.
- Jong-Wha Lee & Phillip Swagel, 2000. "Trade Barriers And Trade Flows Across Countries And Industries," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 372-382, August.
- Jong-Wha Lee & Phillip Swagel, 1994. "Trade barriers and trade flows across countries and industries," International Finance Discussion Papers 476, Board of Governors of the Federal Reserve System (U.S.).
- Gardner, Bruce L, 1987. "Causes of U.S. Farm Commodity Programs," Journal of Political Economy, University of Chicago Press, vol. 95(2), pages 290-310, April.
- kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, EconWPA.
- Olivier Cadot & Jaime de Melo & Marcelo Olarreaga, 2004.
"Lobbying, Counterlobbying, and the Structure of Tariff Protection in Poor and Rich Countries,"
World Bank Economic Review,
World Bank Group, vol. 18(3), pages 345-366.
- Olivier Cadot & Jaime de Melo & Marcelo Olarreaga, 2015. "Lobbying, Counterlobbying, and the Structure of Tariff Protection in Poor and Rich Countries," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 13, pages 295-316 World Scientific Publishing Co. Pte. Ltd..
- 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.
- Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubasoblu, 2004. "Protection versus Promotion: An Empirical Investigation," Economics and Politics, Wiley Blackwell, vol. 16(2), pages 147-162, 07.
- Rod Tyers, 2004. "Implicit Policy Preferences and Trade Reform by Tariff Aggregates," ANU Working Papers in Economics and Econometrics 2004-445, Australian National University, College of Business and Economics, School of Economics.
- Finger, J M & Hall, H Keith & Nelson, Douglas R, 1982. "The Political Economy of Administered Protection," American Economic Review, American Economic Association, vol. 72(3), pages 452-66, June.
- Antoine Bouët & Yvan Decreux & Lionel Fontagné & Sébastien Jean & David Laborde, 2004. "A Consistent, Ad-Valorem Equivalent Measure of Applied Protection Across the World: The MAcMap-HS6 Database," Working Papers 2004-22, CEPII research center.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:6979. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.