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Protection for Sale: An Empirical Investigation

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  • Pinelopi Koujianou Goldberg
  • Giovanni Maggi

Abstract

A prominent model in the recent political-economy literature on trade policy is Grossman and Helpman's (1994) Protection for Sale' model. This model yields clear predictions for the cross-sectional structure of trade protection. The objective of our" paper is to check whether the predictions of the Grossman-Helpman model are consistent with the data and, if the model finds support, to estimate its two key structural parameters: the government's valuation of welfare relative to contributions, and the fraction of the voting population represented by a lobby. We find that the pattern of protection in the U.S. in 1983 is consistent with the basic predictions of the model. Our estimate of the government's valuation of welfare relative to contributions is surprisingly high; the weight of welfare in the government's objective function is estimated to be between 50 and 88 times the weight of contributions.

Suggested Citation

  • Pinelopi Koujianou Goldberg & Giovanni Maggi, 1997. "Protection for Sale: An Empirical Investigation," NBER Working Papers 5942, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:5942
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    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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    3. Grossman, Gene M & Helpman, Elhanan, 1995. "Trade Wars and Trade Talks," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 675-708, August.
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    7. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
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    18. Helpman, Elhanan, 1995. "Politics and Trade Policy," Foerder Institute for Economic Research Working Papers 275606, Tel-Aviv University > Foerder Institute for Economic Research.
    19. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics,in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
    20. 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.
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    JEL classification:

    • F1 - International Economics - - Trade

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