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Protection for Sale with Price Interactions and Incomplete Pass-Through

Author

Listed:
  • Barbara Annicchiarico

    () (Universita degli Studi di Roma2 "Tor Vergata")

  • Enrico Marvasi

    () (Politecnico di Milano)

Abstract

We extend the protection for sale model of Grossman and Helpman (1994) by introducing a general model of monopolistic competition with variable markups and incomplete pass-through. We show that the structure of protection emerging in the political equilibrium not only depends on the weight attached by governments to consumer welfare when making their policy decision, but also on the degree of market power of firms and on the terms-of-trade variations due to the degree of pass-through. Overall, our results highlight the importance of demand characteristics in shaping the structure of protection and are consistent with the occurring of protectionism also in unorganized industries.

Suggested Citation

  • Barbara Annicchiarico & Enrico Marvasi, 2018. "Protection for Sale with Price Interactions and Incomplete Pass-Through," Working Papers LuissLab 18141, Dipartimento di Economia e Finanza, LUISS Guido Carli.
  • Handle: RePEc:lui:lleewp:18141
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    References listed on IDEAS

    as
    1. Kishore Gawande & Usree Bandyopadhyay, 2000. "Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 139-152, February.
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    More about this item

    Keywords

    Protection for Sale; Monopolistic Competition; Incomplete Pass-Through; Endogenous Markups;

    JEL classification:

    • F1 - International Economics - - Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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