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The Effects of Endogenous Protection on the Economic Landscape

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  • Gáname, María Cecilia
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    Abstract

    The author studies the impact of political economy variables on the spatial distribution of industry. The political game between a single lobby and a partial opportunistic incumbent may alter the economic landscape of a small economy. The trade policy endogenously determined becomes the channel to understand how the players’ behaviour impacts on the long run spatial distribution of industry. When the rest of the world is a free trader and the spending share of an economy is relatively small, the marginal change in the trade policy has a relevant impact on the industry share. Amazingly, if a small economy is characterised by a government that is not very much concerned about general welfare and there is a lobby of few capital owners that play actively, the possible outcome will be a relocation of industry that favours such an economy. Capital owners might make capital flow to look for protection. Political variables may act as a dispersion force.

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    Paper provided by Universiteit Antwerpen, Institute of Development Policy and Management (IOB) in its series IOB Working Papers with number 2005.01.

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    Length: 32 pages
    Date of creation: 2005
    Date of revision:
    Handle: RePEc:iob:wpaper:2005001
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    1. Ottaviano, Gianmarco I. P., 2001. "Monopolistic competition, trade, and endogenous spatial fluctuations," Regional Science and Urban Economics, Elsevier, vol. 31(1), pages 51-77, February.
    2. Baldwin, Richard E & Martin, Philippe & Ottaviano, Gianmarco I P, 2001. " Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs," Journal of Economic Growth, Springer, vol. 6(1), pages 5-37, March.
    3. Ottaviano, G.I.P. & Thisse, J.-F., 1999. "Integration, Agglomeration and the Political Economics of Factor Mobility," Economics Working Papers eco99/27, European University Institute.
    4. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Entry and Asymmetric Lobbying: Why Governments Pick Losers," CEP Discussion Papers dp0791, Centre for Economic Performance, LSE.
    5. OTTAVIANO, Gianmarco & THISSE, Jacques-François, . "Agglomeration and economic geography," CORE Discussion Papers RP -1725, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. Baldwin, Richard, 1998. "Agglomeration and Endogenous Capital," CEPR Discussion Papers 1845, C.E.P.R. Discussion Papers.
    7. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
    8. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoglu, 2002. ""Protection For Sale" In A Developing Country: Democracy Vs. Dictatorship," The Review of Economics and Statistics, MIT Press, vol. 84(3), pages 497-508, August.
    9. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, EconWPA.
    10. Behrens, Kristian & Gaigné, Carl & Ottaviano, Gianmarco & Thisse, Jacques-François, 2003. "Inter-regional and International Trade: Seventy Years After Ohlin," CEPR Discussion Papers 4065, C.E.P.R. Discussion Papers.
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