IDEAS home Printed from https://ideas.repec.org/p/lvl/laeccr/0602.html

Endogenous Trade Policies in a Developing Economy

Author

Listed:
  • N.M. Hung
  • N.V. Quyen

Abstract

Consider a small developing economy with a manufacturing sector opened to international trade, and an agricultural sector having limited, not to say any, access to world markets. We modify the Grossman and Helpman's influence-driven model of trade policy formation to allow for an endogenously determined wage rate in a three-sector economy where the manufacturing sector can lobby policy makers for favorable policies. Beside protectionist policies, namely an import tariff or an export subsidy, we show that the owners of the specific factor in agriculture - a non-lobby group - have to bear a consumption tax imposed on their products. This would further strengthen the trade protectionist measure, and imply possibly undesirable general equilibrium repercussions: there will be a reallocation of labor to the manufacturing sector which enjoys an output expansion, an output contraction in the agricultural sector, and a lower workers' "real" income.

Suggested Citation

  • N.M. Hung & N.V. Quyen, 2006. "Endogenous Trade Policies in a Developing Economy," Cahiers de recherche 0602, Université Laval - Département d'économique.
    • Handle: RePEc:lvl:laeccr:0602
    as

    Download full text from publisher

    File URL: http://www.ecn.ulaval.ca/w3/recherche/cahiers/2006/0602.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hillman, Arye L, 1984. "Declining Industries and Political-Support Protectionist Motives: Errata," American Economic Review, American Economic Association, vol. 74(1), pages 260-260, March.
    2. Devashish Mitra, 2016. "Endogenous Lobby Formation and Endogenous Protection: A Long-Run Model of Trade Policy Determination," World Scientific Book Chapters, in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 1, pages 3-21, World Scientific Publishing Co. Pte. Ltd..
    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. Samuelson, Paul A., 1971. "An exact Hume-Ricardo-Marshall model of international trade," Journal of International Economics, Elsevier, vol. 1(1), pages 1-18, February.
    5. Corden, W Max & Neary, J Peter, 1982. "Booming Sector and De-Industrialisation in a Small Open Economy," Economic Journal, Royal Economic Society, vol. 92(368), pages 825-848, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Giacomo A. M. Ponzetto & Maria Petrova & Ruben Enikolopov, 2008. "The Dracula effect: voter information and trade policy," Economics Working Papers 1296, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2020.
    2. Richard E. Baldwin & Frédéric Robert-Nicoud, 2007. "Entry and Asymmetric Lobbying: Why Governments Pick Losers," Journal of the European Economic Association, MIT Press, vol. 5(5), pages 1064-1093, September.
    3. Cassing, James H. & Long, Ngo Van, 2021. "Trade in trash: A political economy approach," European Journal of Political Economy, Elsevier, vol. 67(C).
    4. Giacomo A. M. Ponzetto, 2011. "Heterogeneous Information and Trade Policy," 2011 Meeting Papers 189, Society for Economic Dynamics.
    5. Helpman, E., 1995. "Politics and Trade Policy," Papers 30-95, Tel Aviv - the Sackler Institute of Economic Studies.
    6. Giacomo Ponzetto, 2010. "Asymmetric Information and Trade Policy," Working Papers 514, Barcelona School of Economics.
    7. Long, Ngo Van & Soubeyran, Antoine, 1996. "Lobbying for protection by heterogeneous firms," European Journal of Political Economy, Elsevier, vol. 12(1), pages 19-32, April.
    8. Pravin Krishna & Devashish Mitra, 2003. "Reciprocated Unilateralism in Trade Policy: An Interest-Group Approach," NBER Working Papers 9631, National Bureau of Economic Research, Inc.
    9. Perez-Sebastian, Fidel & Raveh, Ohad & van der Ploeg, Frederick, 2021. "Oil discoveries and protectionism: Role of news effects," Journal of Environmental Economics and Management, Elsevier, vol. 107(C).
    10. Robert Pahre, 1998. "Reactions and Reciprocity," Journal of Conflict Resolution, Peace Science Society (International), vol. 42(4), pages 467-492, August.
    11. Pushan Dutt & Devashish Mitra, 2009. "Explaining Agricultural Distortion Patterns," World Bank Publications - Reports 28159, The World Bank Group.
    12. Dutt, Pushan & Mitra, Devashish, 2009. "Explaining Agricultural Distortion Patterns : The Roles of Ideology, Inequality, Lobbying and Public Finance," Agricultural Distortions Working Paper Series 50299, World Bank.
    13. Brainard, S. Lael & Verdier, Thierry, 1997. "The political economy of declining industries: Senescent industry collapse revisited," Journal of International Economics, Elsevier, vol. 42(1-2), pages 221-237, February.
    14. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    15. Subhayu Bandyopadhyay & Sajal Lahiri & Suryadipta Roy, 2008. "Enlargement and common external tariff in a political-economic model of customs union," Working Papers 2008-022, Federal Reserve Bank of St. Louis.
    16. Andréa M. Maechler, 2000. "The Politics of Trade Liberalization in the Presence of FDI Incentives," Working Papers 00.09, Swiss National Bank, Study Center Gerzensee.
    17. 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.
    18. Bagwell,K. & Staiger,R.W., 2000. "GATT-think," Working papers 19, Wisconsin Madison - Social Systems.
    19. Nuno Limão & Arvind Panagariya, 2003. "Why is there an Anti-trade Bias in Trade Policy?," International Trade 0310003, University Library of Munich, Germany.
    20. Hom M Pant, 1996. "Endogenous Behaviour of the Tariff Rate in a Political Economy," International Trade 9609001, University Library of Munich, Germany, revised 01 Oct 1996.

    More about this item

    JEL classification:

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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lvl:laeccr:0602. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Manuel Paradis (email available below). General contact details of provider: https://edirc.repec.org/data/delvlca.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.