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Domestic political competition and pro-cyclical import protection

Author

Listed:
  • James Lake

    (Southern Methodist University)

  • Maia K. Linask

    (University of Richmond)

Abstract

Governments, especially in developing countries, routinely practice binding overhang (i.e. setting applied tariffs below binding WTO commitments) and frequently move applied tariffs for given products up and down over the business cycle. Moreover, applied tariffs are pro-cyclical in developing countries. We explain this phenomenon using a dynamic theory of lobbying between domestic interest groups. Applied tariffs are pro-cyclical when high-tariff interests (e.g. import-competing industries) capture the government these groups concede lower tariffs to low-tariff interest groups (e.g. exporting firms or firms using imported inputs) during recessions because recessions lower the opportunity cost of lobbying and thereby generate stronger lobbying threats.

Suggested Citation

  • James Lake & Maia K. Linask, 2016. "Domestic political competition and pro-cyclical import protection," Departmental Working Papers 1604, Southern Methodist University, Department of Economics.
  • Handle: RePEc:smu:ecowpa:1604
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    References listed on IDEAS

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    More about this item

    Keywords

    Binding overhang; lobbying; tariff bindings; applied tariffs;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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