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Protection for Free? The Political Economy of U.S. Tariff Suspensions

Author

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  • Ludema, Rodney D
  • Mayda, Anna Maria
  • Mishra, Prachi

Abstract

This paper studies the political influence of individual firms on Congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tariff suspension bills and lobbying expenditures from 1999-2006, and find that indeed verbal opposition by import-competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by proponent and opponent firms sway this probability in opposite directions.

Suggested Citation

  • Ludema, Rodney D & Mayda, Anna Maria & Mishra, Prachi, 2010. "Protection for Free? The Political Economy of U.S. Tariff Suspensions," CEPR Discussion Papers 7926, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:7926
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Baldwin, Richard, 2010. "Unilateral tariff liberalisation," CEPR Discussion Papers 8162, C.E.P.R. Discussion Papers.
    2. Bombardini, Matilde & Trebbi, Francesco, 2012. "Competition and political organization: Together or alone in lobbying for trade policy?," Journal of International Economics, Elsevier, pages 18-26.
    3. Facchini, Giovanni & Mayda, Anna Maria & Mishra, Prachi, 2011. "Do interest groups affect US immigration policy?," Journal of International Economics, Elsevier, pages 114-128.
    4. Bombardini, Matilde & Trebbi, Francesco, 2012. "Competition and political organization: Together or alone in lobbying for trade policy?," Journal of International Economics, Elsevier, pages 18-26.
    5. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, Elsevier.
    6. Lima, Rafael Costa & Moreira, Humberto, 2014. "Information transmission and inefficient lobbying," Games and Economic Behavior, Elsevier, vol. 86(C), pages 282-307.

    More about this item

    Keywords

    cheap talk; endogenous protection; Tariff suspensions;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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