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Declining Industries and Persistent Tariff Protection

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  • Christopher Magee

Abstract

The paper uses a political economy framework to explain the empirical observation that trade protection is persistent. The assumptions that are shown to generate endogenous tariff persistence in the model are quite plausible: agents are uncertain about future prices, tariffs are affected by political pressure, and producers of the import–competing good own sector–specific human capital that may be lost if they exit the industry. The model also reveals that, under the conditions listed above, industries decline gradually in response to a price shock even when producers do not face increasing costs of adjustment.

Suggested Citation

  • Christopher Magee, 2002. "Declining Industries and Persistent Tariff Protection," Review of International Economics, Wiley Blackwell, vol. 10(4), pages 749-762, November.
    • Handle: RePEc:bla:reviec:v:10:y:2002:i:4:p:749-762
    DOI: 10.1111/1467-9396.00362
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    Cited by:

    1. Aksel Erbahar & Yuan Zi, 2015. "Cascading Trade Protection: Theory and Evidence from the U.S," CTEI Working Papers series 04-2015, Centre for Trade and Economic Integration, The Graduate Institute.
    2. Magee, Stephen & Lee, Hak Loh & Lee, Hongshik, 2017. "Simple measures of endogenous free-riding in protectionist lobbies," Economic Modelling, Elsevier, vol. 60(C), pages 324-333.
    3. Erbahar, Aksel & Zi, Yuan, 2017. "Cascading trade protection: Evidence from the US," Journal of International Economics, Elsevier, vol. 108(C), pages 274-299.

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