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Food Protection for Sale

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  • Rigoberto A. Lopez
  • Xenia Matschke

Abstract

This article tests the Protection for Sale (PFS) model using detailed data from US food‐processing industries under alternative import‐demand specifications. All empirical results support the PFS model predictions and previous empirical work qualitatively. However, a surprising result is that we obtain weights between 2.6 and 3.6 for domestic welfare using import slopes or elasticities derived from domestic demand and supply functions. In contrast, results based on directly specified import demands (including the Armington model) yield the usual, unrealistically large estimates for the domestic welfare weight. We contend that this empirical paradox arises mainly because the explanatory variables tend to be extremely large for industries with low import ratios and/or low import elasticities (or slopes) resulting from relatively volatile import prices. The results with derived import parameters point to a much stronger role of campaign contributions within the PFS model than previously found.

Suggested Citation

  • Rigoberto A. Lopez & Xenia Matschke, 2006. "Food Protection for Sale," Review of International Economics, Wiley Blackwell, vol. 14(3), pages 380-391, August.
    • Handle: RePEc:bla:reviec:v:14:y:2006:i:3:p:380-391
    DOI: 10.1111/j.1467-9396.2006.00630.x
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    1. 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.
    2. Xenia Matschke & Shane M. Sherlund, 2006. "Do Labor Issues Matter in the Determination of U.S. Trade Policy? An Empirical Reevaluation," American Economic Review, American Economic Association, vol. 96(1), pages 405-421, March.
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    7. 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..
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    10. Rigoberto A. Lopez, 2001. "Campaign Contributions and Agricultural Subsidies," Economics and Politics, Wiley Blackwell, vol. 13(3), pages 257-279, November.
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    12. Devashish Mitra, 2016. "Endogenous Lobby Formation and Endogenous Protection: A Long-Run Model of Trade Policy Determination," World Scientific Book Chapters, in: The Political Economy of Trade Policy Theory, Evidence and Applications, chapter 1, pages 3-21, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Stephen Devadoss & Jeff Luckstead, 2020. "US–Brazilian cotton policies," The World Economy, Wiley Blackwell, vol. 43(8), pages 2222-2236, August.
    2. Yoto V. Yotov, 2010. "Trade‐Induced Unemployment: How Much Do We Care?," Review of International Economics, Wiley Blackwell, vol. 18(5), pages 972-989, November.
    3. repec:bla:ecinqu:v:51:y:2013:i:3:p:1867-1885 is not listed on IDEAS
    4. Anne-Célia Disdier & Frank van Tongeren, 2010. "Non-Tariff Measures in Agri-Food Trade: What Do the Data Tell Us? Evidence from a Cluster Analysis on OECD Imports," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(3), pages 436-455.
    5. repec:lic:licosd:32312 is not listed on IDEAS
    6. Matschke, Xenia, 2008. "Costly revenue-raising and the case for favoring import-competing industries," Journal of International Economics, Elsevier, vol. 74(1), pages 143-157, January.
    7. Stephen Devadoss & Elijah Kosse, 2020. "Political economy of the US–Mexican tomato trade agreement," The World Economy, Wiley Blackwell, vol. 43(4), pages 1059-1075, April.
    8. Per G. Fredriksson & Khawaja A. Mamun, 2014. "Tobacco Politics and Electoral Accountability in the United States," Public Finance Review, , vol. 42(1), pages 4-34, January.
    9. Etienne Farvaque & Gael Lagadec, 2009. "Electoral Control when Policies are for Sale," CESifo Working Paper Series 2522, CESifo.
    10. Kym Anderson & Gordon Rausser & Johan Swinnen, 2013. "Political Economy of Public Policies: Insights from Distortions to Agricultural and Food Markets," Journal of Economic Literature, American Economic Association, vol. 51(2), pages 423-477, June.
    11. repec:ags:aaea22:335549 is not listed on IDEAS
    12. Changyuan Luo & Jun Zhang, 2010. "China Trade Policy Review: A Political Economy Approach," The World Economy, Wiley Blackwell, vol. 33(11), pages 1390-1413, November.
    13. repec:lic:licosd:27611 is not listed on IDEAS

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F1 - International Economics - - Trade
    • L66 - Industrial Organization - - Industry Studies: Manufacturing - - - Food; Beverages; Cosmetics; Tobacco
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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