Lobbying and Information Transmission in Customs Unions
This paper studies a customs union agreement when governments are subject to the pressure of special interest groups that have better information about the competitiveness of the industries they represent. We focus on the agreement’s effect on the structure of political influence. When joining a customs union, the structure of political pressure changes and with privately informed lobbies, a new effect emerges: the governments can use the information they learn from the lobby of one country to extract rents from the lobbies of the other country. We call this the “information transmission effect”. This effect enhances the governments’ bargaining power in a customs union and makes lobbies demand less protection. Thus, we find that information transmission increases the welfare of the agreement and decreases tariffs towards non-members. We also investigate the incentives for the creation of a customs union and find that information transmission makes such agreement more likely to be politically sustainable.
|Date of creation:||Oct 2008|
|Date of revision:|
|Contact details of provider:|| Postal: Avenida dos Bandeirantes, 3900 Ribeirão Preto - SP|
Phone: (016) 633-5617
Fax: (016) 633-6133
Web page: http://www.cpq.fearp.usp.br/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Martimort, David & Moreira, Humberto Ataíde, 2004. "Common agency with informed principals," Economics Working Papers (Ensaios Economicos da EPGE) 551, FGV/EPGE Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
- Emanuel Ornelas, 2007. "Exchanging market access at the outsiders' expense: the case of customs unions," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 207-224, February.
- David Martimort & Aggey Semenov, 2007. "Political Biases in Lobbying under Asymmetric Information," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 614-623, 04-05.
- Emanuel Ornelas, 2005. "Rent Destruction and the Political Viability of Free Trade Agreements," The Quarterly Journal of Economics, Oxford University Press, vol. 120(4), pages 1475-1506.
- Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
- Martin Richardson, 1994. "Why A Free Trade Area? The Tariff Also Rises," Economics and Politics, Wiley Blackwell, vol. 6(1), pages 79-96, 03.
- Ornelas, Emanuel, 2005. "Endogenous free trade agreements and the multilateral trading system," Journal of International Economics, Elsevier, vol. 67(2), pages 471-497, December.
- Lima, Rafael Costa & Moreira, Humberto, 2014. "Information transmission and inefficient lobbying," Games and Economic Behavior, Elsevier, vol. 86(C), pages 282-307.
When requesting a correction, please mention this item's handle: RePEc:fea:wpaper:09_01. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Vizona Liberato)
If references are entirely missing, you can add them using this form.