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Protection for Sale in the EU

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  • Marianna Belloc

Abstract

This paper presents estimation of the Grossman-Helpman (1994) model for the EU. We try to address a number of pitfalls that surround the previous empirical literature. First, we suggest a new identification strategy that enables to single out politically organized sectors with specific regard to trade policy. Second, we utilize two alternative measures of trade protection (ad-valorem equivalent of non-tariff barriers and overall restrictiveness) and adopt industrial and trade data at a high level of disaggregation. Finally, we directly obtain the structural coefficients of the model by estimating a nonlinear simultaneous equations system that is tightly linked to theory. We find that the theoretical model is broadly consistent with data and conclusions turn out internally coherent.

Suggested Citation

  • Marianna Belloc, 2007. "Protection for Sale in the EU," Working Papers 100, University of Rome La Sapienza, Department of Public Economics.
  • Handle: RePEc:sap:wpaper:wp100
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    References listed on IDEAS

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    1. Hiau LooiKee & Alessandro Nicita & Marcelo Olarreaga, 2009. "Estimating Trade Restrictiveness Indices," Economic Journal, Royal Economic Society, vol. 119(534), pages 172-199, January.
    2. Giovanni Facchini & Johannes Van Biesebroeck & Gerald Willmann, 2006. "Protection for sale with imperfect rent capturing," Canadian Journal of Economics, Canadian Economics Association, vol. 39(3), pages 845-873, August.
    3. James E. Anderson & J. Peter Neary, 1996. "A New Approach to Evaluating Trade Policy," Review of Economic Studies, Oxford University Press, vol. 63(1), pages 107-125.
    4. Devashish Mitra & Dimitrios D. Thomakos & Mehmet Ulubaşoğlu, 2016. "Can we obtain realistic parameter estimates for the ‘protection for sale’ model?," World Scientific Book Chapters,in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 10, pages 175-198 World Scientific Publishing Co. Pte. Ltd..
    5. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-850, September.
    6. Elhanan Helpman, 1995. "Politics and Trade Policy," NBER Working Papers 5309, National Bureau of Economic Research, Inc.
    7. Phillip McCalman, 2004. "Protection for Sale and Trade Liberalization: an Empirical Investigation," Review of International Economics, Wiley Blackwell, vol. 12(1), pages 81-94, February.
    8. James E. Anderson & J. Peter Neary, 2003. "The Mercantilist Index of Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 44(2), pages 627-649, May.
    9. Chow, Gregory C, 1973. "On the Computation of Full-Information Maximum Likelihood Estimates for Nonlinear Equation Systems," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 104-109, February.
    10. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
    11. Imai, Susumu & Katayama, Hajime & Krishna, Kala, 2009. "Protection for sale or surge protection?," European Economic Review, Elsevier, vol. 53(6), pages 675-688, August.
    12. Kelejian, Harry H., 1982. "An extension of a standard test for heteroskedasticity to a systems framework," Journal of Econometrics, Elsevier, vol. 20(2), pages 325-333, November.
    13. By Kishore Gawande & Pravin Krishna & Marcelo Olarreaga, 2012. "Lobbying Competition Over Trade Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 53(1), pages 115-132, February.
    14. Helpman, Elhanan, 1995. "Politics and Trade Policy," Foerder Institute for Economic Research Working Papers 275606, Tel-Aviv University > Foerder Institute for Economic Research.
    15. Marianna Belloc & Paolo Guerrieri, 2008. "Special Interest Groups and Trade Policy in the EU," Open Economies Review, Springer, vol. 19(4), pages 457-478, September.
    16. Kishore Gawande & Pravin Krishna & Michael J. Robbins, 2006. "Foreign Lobbies and U.S. Trade Policy," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 563-571, August.
    17. 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.
    18. Imai, Susumu & Katayama, Hajime & Krishna, Kala, 2006. "Protection for Sale or Surge Protection?," Queen's Economics Department Working Papers 273590, Queen's University - Department of Economics.
    19. repec:wsi:wschap:9789814569156_0009 is not listed on IDEAS
    20. kishore gawande & pravin krishna, 2005. "The Political Economy of Trade Policy: Empirical Approaches," International Trade 0503003, University Library of Munich, Germany.
    21. Karacaovali, Baybars & Limão, Nuno, 2008. "The clash of liberalizations: Preferential vs. multilateral trade liberalization in the European Union," Journal of International Economics, Elsevier, vol. 74(2), pages 299-327, March.
    22. Christophe Crombez, 2002. "Information, Lobbying and the Legislative Process in the European Union," European Union Politics, , vol. 3(1), pages 7-32, March.
    23. Kishore Gawande, 1998. "Comparing Theories Of Endogenous Protection: Bayesian Comparison Of Tobit Models Using Gibbs Sampling Output," The Review of Economics and Statistics, MIT Press, vol. 80(1), pages 128-140, February.
    24. Belfrage, Carl-Johan, 2004. "Special Interest Politics and Trade Policy – An Empirical Challenge," Working Papers 2005:31, Lund University, Department of Economics.
    25. Devashish Mitra & Dimitrios D. Thomakos & Mehmet A. Ulubaşoğlu, 2016. "“Protection For Sale” In A Developing Country: Democracy Vs. Dictatorship," World Scientific Book Chapters,in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 9, pages 163-174 World Scientific Publishing Co. Pte. Ltd..
    26. Leamer, Edward E., 1990. "Latin America as a target of trade barriers erected by the major developed countries in 1983," Journal of Development Economics, Elsevier, vol. 32(2), pages 337-368, April.
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    Cited by:

    1. Imai, Susumu & Katayama, Hajime & Krishna, Kala, 2007. "Is Protection Really for Sale? A Survey and Directions for Future Research," Queen's Economics Department Working Papers 273627, Queen's University - Department of Economics.
    2. Imai, Susumu & Katayama, Hajime & Krishna, Kala, 2009. "Is protection really for sale? A survey and directions for future research," International Review of Economics & Finance, Elsevier, vol. 18(2), pages 181-191, March.

    More about this item

    Keywords

    Trade policy; European Union; Lobbying; Political economy; Simultaneous Equations Models.;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models

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