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Protection for Sale

Author Info

  • Grossman, G.M.
  • Helpman, E.

Abstract

We develop a model in which special interest groups make political contributions in order to influence an incumbent government's choice of trade policy. In the political equilibrium, the interest groups bid for protection, and each group's offer is optimal given the offers of the others. The politicians maximize their own welfare, which depends on the total amount of contributions collected and on the aggregate welfare of voters. We study the structure of protection that emerges in political equilibrium and the equilibrium contributions that are made by the different industry lobby groups, and show why these groups may in some cases prefer to have the government use trade policy to transfer income rather than more efficient means. We also discuss how our framework might be extended to include endogenous formation of lobby groups, political competition between incumbents and challengers, and political outcomes in a multicountry trading system.

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Paper provided by Tel Aviv in its series Papers with number 21-92.

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Length: 40 pages
Date of creation: 1992
Date of revision:
Handle: RePEc:fth:teavfo:21-92
Contact details of provider: Postal: Israel TEL-AVIV UNIVERSITY, THE FOERDER INSTITUTE FOR ECONOMIC RESEARCH, RAMAT AVIV 69 978 TEL AVIV ISRAEL.
Phone: 972-3-640-9255
Fax: 972-3-640-5815
Web page: http://econ.tau.ac.il/research/foerder.aspEmail:


More information through EDIRC

Keywords: trade policy ; interest groups ; economic equilibrium;

Other versions of this item:

Find related papers by JEL classification:
  • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
  • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

References listed on IDEAS
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  1. Ronald Findlay & Stanislaw Wellisz, 1982. "Endogenous Tariffs, the Political Economy of Trade Restrictions, and Welfare," NBER Chapters, in: Import Competition and Response, pages 223-244 National Bureau of Economic Research, Inc.
  2. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December.
  3. Van Long, Ngo & Vousden, Neil, 1991. "Protectionist responses and declining industries," Journal of International Economics, Elsevier, vol. 30(1-2), pages 87-103, February.
  4. Baldwin, Robert E., 1984. "Trade policies in developed countries," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 12, pages 571-619 Elsevier.
  5. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
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Blog mentions

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  1. Money and U.S. Politics
    by jamesoswald in azmytheconomics on 2012-03-20 14:59:21

RePEc Biblio mentions

As found on the RePEc Biblio, the curated bibliography for Economics:
  1. > International Economics > International Trade
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