Some recent empirical studies, motivated by Grossman and Helpman's (1994) "protection for sale" model, suggest that very few factors (none of them labor-related) determine trade protection. This paper reexamines the roles that labor issues play in the determination of trade policy. We introduce collective bargaining, differences in labor mobility across industries, and trade union lobbying into the protection-for-sale model and show that the equilibrium protection rate in our model depends upon these labor market variables. In particular, our model predicts that trade protection is structurally higher than in the original protection-for-sale model if the trade union of a sector lobbies but capital owners do not, because union workers collect part of the protection rents; equilibrium protection is lower if capital owners lobby but the trade union does not, because part of the protection rents is dissipated to workers. Using data from U.S. manufacturing, we find that collective bargaining, differences in labor mobility across industries, and trade union lobbying indeed play important roles in the determination of U.S. trade policy.
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Paper provided by University of Connecticut, Department of Economics in its series Working papers with number
2004-36.
Length: 25 pages Date of creation: Nov 2004 Date of revision:
May 2005 Handle: RePEc:uct:uconnp:2004-36
Note: We thank the editor David Card and two anonymous referees for helpful comments that greatly improved this paper. We also thank Scott Taylor for his valuable comments and advice and Kishore Gawande, Thomas Osang and Daniel Trefler for providing data. We are grateful to Bob Baldwin, Kishore Gawande, Bruce Hansen, Phil McCalman, Thomas Osang, Bob Staiger, Gautam Tripathi and participants at numerous seminars for helpful comments and suggestions. Ellen Dykes and Jonas Robison are thanked for their help with editing. Xenia Matschke gratefully acknowledges financial support from a Deutsche Forschungsgemeinschaft research fellowship. This paper represents the views of the authors and does not necessarily represent the views of the Federal Reserve System, its members, or its staff. Contact details of provider: Postal: University of Connecticut 341 Mansfield Road, Unit 1063 Storrs, CT 06269-1063 Phone: (860) 486-4889 Fax: (860) 486-4463 Web page: http://www.econ.uconn.edu/ More information through EDIRC
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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.:
Grossman, Gene M & Helpman, Elhanan, 1994.
"Protection for Sale,"
American Economic Review,
American Economic Association, vol. 84(4), pages 833-50, September.
[Downloadable!] (restricted)
Other versions:
Gene M. Grossman & Elhanan Helpman, 1992.
"Protection For Sale,"
NBER Working Papers
4149, National Bureau of Economic Research, Inc.
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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.)
Rigoberto A. Lopez & Xenia Matschke, 2005.
"Food Protection for Sale,"
Working papers
2005-13, University of Connecticut, Department of Economics, revised Nov 2005.
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Other versions:
Lopez, Rigoberto A. & Matschke, Xenia, 2005.
"Food Protection for Sale,"
Research Reports
25195, University of Connecticut, Food Marketing Policy Center.
[Downloadable!]