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

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

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7926.

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Date of creation: Jul 2010
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Handle: RePEc:cpr:ceprdp:7926
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  1. Christian Broda & Nuno Limao & David E. Weinstein, 2008. "Optimal Tariffs and Market Power: The Evidence," American Economic Review, American Economic Association, vol. 98(5), pages 2032-65, December.
  2. Gawande, Kishore & Maloney, William & Montes Rojas, Gabriel V., 2009. "Foreign informational lobbying can enhance tourism : evidence from the Caribbean," Policy Research Working Paper Series 4834, The World Bank.
  3. Theo Eicher & Thomas Osang, 2002. "Protection for Sale: An Empirical Investigation: Comment," American Economic Review, American Economic Association, vol. 92(5), pages 1702-1710, December.
  4. Pinsky, Laura & Tower, Edward, 1995. "Temporary duty suspension in the United States," The North American Journal of Economics and Finance, Elsevier, vol. 6(1), pages 17-36.
  5. Gawande, Kishore & Krishna, Pravin & Olarreaga, Marcelo, 2009. "Lobbying competition over trade policy," CEPR Discussion Papers 7305, C.E.P.R. Discussion Papers.
  6. Susumu Imai & Hajime Katayama & Kala Krishna, 2008. "Is Protection Really for Sale? A Survey and Directions for Future Research," NBER Working Papers 13899, National Bureau of Economic Research, Inc.
  7. Costinot, Arnaud, 2008. "Jobs, Jobs, Jobs: A "New" Perspective on Protectionism," University of California at San Diego, Economics Working Paper Series qt1cp9749b, Department of Economics, UC San Diego.
  8. Bombardini, Matilde & Trebbi, Francesco, 2012. "Competition and political organization: Together or alone in lobbying for trade policy?," Journal of International Economics, Elsevier, vol. 87(1), pages 18-26.
  9. Josh Ederington & Jenny Minier, 2008. "Reconsidering the empirical evidence on the Grossman-Helpman model of endogenous protection," Canadian Journal of Economics, Canadian Economics Association, vol. 41(2), pages 501-516, May.
  10. Chen, Hui & Parsley, David & Yang, Ya-wen, 2010. "Corporate Lobbying and Financial Performance," MPRA Paper 21114, University Library of Munich, Germany.
  11. Omer Gokcekus & Amber Barth, 2007. "Political economy of the U.S. temporary duty suspension program: An empirical note," Public Choice, Springer, vol. 131(3), pages 345-350, June.
  12. Dutt, Pushan & Mitra, Devashish, 2002. "Endogenous trade policy through majority voting: an empirical investigation," Journal of International Economics, Elsevier, vol. 58(1), pages 107-133, October.
  13. Chamberlain, Gary, 1984. "Panel data," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 22, pages 1247-1318 Elsevier.
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