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Cross-Border Political Donations and Pareto-Efficient Tariffs

  • Masahiro Endoh

    ()

    (Economic Growth Center, Yale University)

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    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
    Date of revision:
    Handle: RePEc:egc:wpaper:915
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    17. Bernheim, B Douglas & Whinston, Michael D, 1986. "Menu Auctions, Resource Allocation, and Economic Influence," The Quarterly Journal of Economics, MIT Press, vol. 101(1), pages 1-31, February.
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