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Protectionist demands in globalization

Author

Listed:
  • Arzu Ilhan
  • Özgür Kibris

Abstract

This paper analyzes a small, open economy whose citizens have single-peaked preferences on the tariff rate for an import good. They publicly declare this rate to the government, which has discretion in implementing it. While the government has an incentive not to deviate too much from the publicly chosen tariff rate, its final choice is determined by bargaining with a foreign lobby that has a much lower optimal rate and offers monetary transfers in return for lower tariffs. The authors show that the expectation of foreign influence causes citizens to vote for a more protectionist tariff policy. Moreover, citizens’ behavior leads to an increase in transfers by the foreign lobby.

Suggested Citation

  • Arzu Ilhan & Özgür Kibris, 2000. "Protectionist demands in globalization," Working Paper 0006, Federal Reserve Bank of Cleveland.
  • Handle: RePEc:fip:fedcwp:0006
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    References listed on IDEAS

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    1. Rubinstein, Ariel, 1982. "Perfect Equilibrium in a Bargaining Model," Econometrica, Econometric Society, vol. 50(1), pages 97-109, January.
    2. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    3. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-985, December.
    4. Kalai, Ehud & Smorodinsky, Meir, 1975. "Other Solutions to Nash's Bargaining Problem," Econometrica, Econometric Society, vol. 43(3), pages 513-518, May.
    5. Dani Rodrik, 1997. "Has Globalization Gone Too Far?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 57.
    6. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, vol. 18(2), pages 155-162, April.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Tariff ; Trade;

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