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Import Peneteration and the Politics of Trade Protection

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Author Info
Giovanni Maggi
Andres Rodriguez-Clare

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Abstract

In this paper we reconsider a key empirical prediction generated by an important class of political-economy models of trade policy, namely that trade protection should be higher in sectors characterized by lower import penetration (we call this the little support for this prediction. In this paper we argue that the standard prediction depends critically on the assumptions that trade taxes are the only policy instruments and that the government has access to non-distortionary taxation. We analyze a model in which the government can use quotas and VERs in addition to trade taxes and raising public funds may be costly. Under a simple sufficient condition, our model predicts that the protection level increases with import penetration, both in sectors that are protected with tariffs and in sectors that are protected with quantitative restrictions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6711.

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Date of creation: Aug 1998
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Handle: RePEc:nbr:nberwo:6711

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Find related papers by JEL classification:
F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Models of Political Processes: Rent-seeking, Elections, Legislatures, and Voting Behavior

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Helpman, Elhanan, 1995. "Politics and Trade Policy," CEPR Discussion Papers 1269, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. J. Michael Finger & Ann Harrison, 1994. "The MFA Paradox: More Protection and More Trade?," NBER Working Papers 4751, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September. [Downloadable!] (restricted)
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  4. Pinelopi Koujianou Goldberg & Giovanni Maggi, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December. [Downloadable!] (restricted)
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  5. Kyle Bagwell & Robert W. Staiger, 1996. "Reciprocal Trade Liberalization," NBER Working Papers 5488, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Hillman, Arye L & Ursprung, Heinrich W, 1988. "Domestic Politics, Foreign Interests, and International Trade Policy," American Economic Review, American Economic Association, vol. 78(4), pages 719-45, September.
  7. Borrell, Brent & Maw-Cheng Yang, 1992. "EC Bananarama 1992 : the sequel - the EC Commission proposal," Policy Research Working Paper Series 958, The World Bank. [Downloadable!]
  8. Mayer, Wolfgang, 1984. "Endogenous Tariff Formation," American Economic Review, American Economic Association, vol. 74(5), pages 970-85, December. [Downloadable!] (restricted)
  9. Mayer, Wolfgang & Riezman, Raymond G., 1987. "Endogenous choice of trade policy instruments," Journal of International Economics, Elsevier, vol. 23(3-4), pages 377-381, November. [Downloadable!] (restricted)
  10. Hillman, Arye L, 1982. "Declining Industries and Political-Support Protectionist Motives," American Economic Review, American Economic Association, vol. 72(5), pages 1180-87, December. [Downloadable!] (restricted)
  11. Robert C. Feenstra & Tracy R. Lewis, 1987. "Negotiated Trade Restrictions with Private Political Pressure," NBER Working Papers 2374, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Cassing, James H. & Hillman, Arye L., 1985. "Political influence motives and the choice between tariffs and quotas," Journal of International Economics, Elsevier, vol. 19(3-4), pages 279-290, November. [Downloadable!] (restricted)
  13. Anderson, Kym, 1980. "The Political Market for Government Assistance to Australian Manufacturing Industries," The Economic Record, The Economic Society of Australia, vol. 56(153), pages 132-44, June.
  14. Rosendorff, B Peter, 1996. "Voluntary Export Restraints, Antidumping Procedure, and Domestic Politics," American Economic Review, American Economic Association, vol. 86(3), pages 544-61, June. [Downloadable!] (restricted)
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  15. 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. [Downloadable!]
  16. Feenstra, Robert C, 1992. "How Costly Is Protectionism?," Journal of Economic Perspectives, American Economic Association, vol. 6(3), pages 159-78, Summer. [Downloadable!] (restricted)
  17. Levy, Philip I., 1999. "Lobbying and international cooperation in tariff setting," Journal of International Economics, Elsevier, vol. 47(2), pages 345-370, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Xenia Matschke & Shane Sherlund, 2003. "Do Labor Issues Matter In The Determination Of U.S. Trade Policy? An Empirical Reevaluation," Santa Cruz Department of Economics, Working Paper Series 1029, Department of Economics, UC Santa Cruz. [Downloadable!]
    Other versions:
  2. Nuno Limão & Arvind Panagariya, 2003. "Why is there an Anti-trade Bias in Trade Policy?," International Trade 0310003, EconWPA. [Downloadable!]
  3. Giovanni Facchini & Johannes Van Biesebroeck & Gerald Willmann, 2005. "Protection for Sale with Imperfect Rent Capturing," Development Working Papers 207, Centro Studi Luca d\'Agliano, University of Milano. [Downloadable!]
    Other versions:
  4. Philip I. Levy, 2003. "Non-Tariff Barriers as a Test of Political Economy Theories," Working Papers 852, Economic Growth Center, Yale University. [Downloadable!]
  5. Scott Bradford, 2000. "Rents, Votes, and Protection: Explaining the Structure of Trade Barriers Across Industries," Econometric Society World Congress 2000 Contributed Papers 1717, Econometric Society. [Downloadable!]
  6. Gulati, Sumeet, 2003. "The Effect Of Free Trade On Pollution Policy And Welfare," Working Papers 15849, University of British Columbia, Food and Resource Economics. [Downloadable!]
  7. Pinelopi Koujianou Goldbe & Giovanni Maggi, 1997. "Protection for Sale: An Empirical Investigation," NBER Working Papers 5942, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Nuno Limao & Arvind Panagariya, 2004. "Anti-trade Bias in Trade Policy and General Equilibrium," Contributions to Economic Analysis & Policy, Berkeley Electronic Press, vol. 3(1), pages 1278-1278. [Downloadable!] (restricted)
  9. Theo Eicher & Thomas Osang, 2002. "Protection for Sale: An Empirical Investigation: Comment," American Economic Review, American Economic Association, vol. 92(5), pages 1702-1710, December. [Downloadable!]
  10. Boccard, Nicolas & Wauthy, Xavier, 2003. "Sales Restriction, Quality Selection and the Mode of Competition," Working Papers of the Department of Economics, University of Girona 5, Department of Economics, University of Girona. [Downloadable!]
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