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Cross-Border Political Donations and Pareto-Efficient Tariffs

Listed author(s):
  • Masahiro Endoh

    ()

    (Economic Growth Center, Yale University)

This paper examines the effects of lobbying activities across international borders, on determining each country’s import tariff in a multi-principal, multi-agent, menu-auction model. Cross-border political donations could promote international policy cooperation because of two of their distinctive characteristics. First, special interest groups use cross-border donations as tools to wield their influence on ruling parties of other countries directly, which promotes efficiency of policy formation. Second, for ruling parties of countries, cross-border donations make them take into account the impact of their policy on other countries, which makes them more sensitive to other countries’ welfare and, therefore, more cooperative with others. When ruling parties estimate the worth of political contributions from national special interest groups and from foreign lobbying groups with the same weight, Pareto-efficient tariffs are attained at which world welfare is maximized.

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File URL: http://www.econ.yale.edu/growth_pdf/cdp915.pdf
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Paper provided by Economic Growth Center, Yale University in its series Working Papers with number 915.

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Length: 30 pages
Date of creation: Jun 2005
Handle: RePEc:egc:wpaper:915
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  1. B. Douglas Bernheim & Michael D. Whinston, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, Oxford University Press, vol. 101(1), pages 1-31.
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  4. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
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  9. Paola Conconi, 2003. "Green Lobbies and Transboundary Pollution in Large Open Economies," ULB Institutional Repository 2013/5837, ULB -- Universite Libre de Bruxelles.
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  14. Prat, A. & Rustichini, A., 1999. "Games Played Through Agents," Discussion Paper 1999-68, Tilburg University, Center for Economic Research.
  15. Kirchsteiger, Georg & Prat, Andrea, 2001. "Inefficient equilibria in lobbying," Journal of Public Economics, Elsevier, vol. 82(3), pages 349-375, December.
  16. Devashish Mitra, 1999. "Endogenous Lobby Formation and Endogenous Protection: A Long-Run Model of Trade Policy Determination," American Economic Review, American Economic Association, vol. 89(5), pages 1116-1134, December.
  17. Kee, Hiau Looi & Olarreaga, Marcelo & Silva, Peri, 2003. "Market Access for Sale: Latin America's Lobbying for US Tariff Preferences," CEPR Discussion Papers 4077, C.E.P.R. Discussion Papers.
  18. Krishna, Pravin & Mitra, Devashish, 2005. "Reciprocated unilateralism in trade policy," Journal of International Economics, Elsevier, vol. 65(2), pages 461-487, March.
  19. Josh Ederington, 2001. "International Coordination of Trade and Domestic Policies," American Economic Review, American Economic Association, vol. 91(5), pages 1580-1593, December.
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