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Lobbying competition over trade policy

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  • Olarreaga, Marcelo
  • Gawande, Kishore
  • Krishna, Pravin

Abstract

Competition between opposing lobbies is an important factor in the endogenous determination of trade policy. This paper investigates empirically the consequences of lobbying competition between upstream and downstream producers for trade policy. The theoretical structure underlying the empirical analysis is the well-known Grossman-Helpman model of trade policy determination, modified suitably to account for the cross-sectoral use of inputs in production (itself a quantitatively significant phenomenon with around 50 percent of manufacturing output being used by other sectors rather than in final consumption). Data from more than 40 countries are used in our analysis. Our empirical results validate the predictions of the theoretical model with lobbying competition. Importantly, accounting for lobbying competition also alters substantially estimates of the "welfare-mindedness" of governments in setting trade policy.

Suggested Citation

  • Olarreaga, Marcelo & Gawande, Kishore & Krishna, Pravin, 2009. "Lobbying competition over trade policy," CEPR Discussion Papers 7305, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7305
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    More about this item

    Keywords

    Interest groups; Intermediate goods; Lobbies; Political economy; Trade policy;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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