IDEAS home Printed from https://ideas.repec.org/p/fea/wpaper/09_01.html
   My bibliography  Save this paper

Lobbying and Information Transmission in Customs Unions

Author

Listed:
  • Rafael Lima
  • Humberto Moreira
  • Thierry Verdier

Abstract

This paper studies a customs union agreement when governments are subject to the pressure of special interest groups that have better information about the competitiveness of the industries they represent. We focus on the agreement’s effect on the structure of political influence. When joining a customs union, the structure of political pressure changes and with privately informed lobbies, a new effect emerges: the governments can use the information they learn from the lobby of one country to extract rents from the lobbies of the other country. We call this the “information transmission effect”. This effect enhances the governments’ bargaining power in a customs union and makes lobbies demand less protection. Thus, we find that information transmission increases the welfare of the agreement and decreases tariffs towards non-members. We also investigate the incentives for the creation of a customs union and find that information transmission makes such agreement more likely to be politically sustainable.

Suggested Citation

  • Rafael Lima & Humberto Moreira & Thierry Verdier, 2008. "Lobbying and Information Transmission in Customs Unions," Working Papers 09_01, Universidade de São Paulo, Faculdade de Economia, Administração e Contabilidade de Ribeirão Preto.
    • Handle: RePEc:fea:wpaper:09_01
    as

    Download full text from publisher

    File URL: ftp://cpq.fearp.usp.br:2300/textos_discussao/eco/wpe09_01.pdf
    File Function: First version, 2008
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Emanuel Ornelas, 2007. "Exchanging market access at the outsiders' expense: the case of customs unions," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 207-224, February.
    2. Martimort, David & Moreira, Humberto Ataíde, 2004. "Common agency with informed principals," FGV EPGE Economics Working Papers (Ensaios Economicos da EPGE) 551, EPGE Brazilian School of Economics and Finance - FGV EPGE (Brazil).
    3. Martin Richardson, 2017. "Why a Free Trade Area? The Tariff also Rises," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 6, pages 129-152, World Scientific Publishing Co. Pte. Ltd..
    4. Grossman, Gene M & Helpman, Elhanan, 1995. "The Politics of Free-Trade Agreements," American Economic Review, American Economic Association, vol. 85(4), pages 667-690, September.
    5. Maskin, Eric & Tirole, Jean, 1992. "The Principal-Agent Relationship with an Informed Principal, II: Common Values," Econometrica, Econometric Society, vol. 60(1), pages 1-42, January.
    6. Martin Richardson, 2017. "Endogenous Protection and Trade Diversion," World Scientific Book Chapters, in: Dimensions of Trade Policy, chapter 5, pages 107-127, World Scientific Publishing Co. Pte. Ltd..
    7. Emanuel Ornelas, 2005. "Rent Destruction and the Political Viability of Free Trade Agreements," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 120(4), pages 1475-1506.
    8. Maskin, Eric & Tirole, Jean, 1990. "The Principal-Agent Relationship with an Informed Principal: The Case of Private Values," Econometrica, Econometric Society, vol. 58(2), pages 379-409, March.
    9. Ornelas, Emanuel, 2005. "Endogenous free trade agreements and the multilateral trading system," Journal of International Economics, Elsevier, vol. 67(2), pages 471-497, December.
    10. Lima, Rafael Costa & Moreira, Humberto, 2014. "Information transmission and inefficient lobbying," Games and Economic Behavior, Elsevier, vol. 86(C), pages 282-307.
    11. David Martimort & Aggey Semenov, 2007. "Political Biases in Lobbying under Asymmetric Information," Journal of the European Economic Association, MIT Press, vol. 5(2-3), pages 614-623, 04-05.
    12. Potters, Jan & van Winden, Frans, 1992. "Lobbying and Asymmetric Information," Public Choice, Springer, vol. 74(3), pages 269-292, October.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Verdier, Thierry & Costa Lima, Rafael & Moreira, Humberto, 2012. "Centralized decision making against informed lobbying," CEPR Discussion Papers 9199, C.E.P.R. Discussion Papers.
    2. Ornelas, Emanuel, 2012. "Preferential trade agreements and the labor market," LSE Research Online Documents on Economics 121752, London School of Economics and Political Science, LSE Library.
    3. Ornelas, Emanuel & Tovar, Patricia, 2022. "Intra-bloc tariffs and preferential margins in trade agreements," Journal of International Economics, Elsevier, vol. 138(C).
    4. Crivelli, Pramila, 2016. "Regionalism and falling external protection in high and low tariff members," Journal of International Economics, Elsevier, vol. 102(C), pages 70-84.
    5. Hinnerk Gnutzmann & Arevik Gnutzmann‐Mkrtchyan, 2019. "The silent success of customs unions," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 52(1), pages 178-224, February.
    6. Marco Fugazza & Frédéric Robert-Nicoud, 2014. "The “Emulator Effect” of the Uruguay Round on US Regionalism," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 1049-1078, November.
    7. Kyle Bagwell & Chad P. Bown & Robert W. Staiger, 2016. "Is the WTO Passé?," Journal of Economic Literature, American Economic Association, vol. 54(4), pages 1125-1231, December.
    8. Staiger, Robert & Bagwell, Kyle & Bown, Chad, 2015. "Is the WTO Passé?," CEPR Discussion Papers 10672, C.E.P.R. Discussion Papers.
    9. repec:ilo:ilowps:469183 is not listed on IDEAS
    10. Joseph Mai & Andrey Stoyanov, 2015. "The effect of the Canada‐US Free Trade Agreement on Canadian multilateral trade liberalization," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(3), pages 1067-1098, August.
    11. Baybars Karacaovali, 2016. "Trade-diverting free trade agreements, external tariffs, and feasibility," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 25(1), pages 1-22, February.
    12. Facchini, Giovanni & Silva, Peri & Willmann, Gerald, 2013. "The customs union issue: Why do we observe so few of them?," Journal of International Economics, Elsevier, vol. 90(1), pages 136-147.
    13. Marco Fugazza & Frédéric Robert-Nicoud, 2012. "The ‘Emulator Effect’ Of The Uruguay Round On United States Regionalism," UNCTAD Blue Series Papers 51, United Nations Conference on Trade and Development.
    14. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 317-390, Elsevier.
    15. Yanase, Akihiko & Tsubuku, Masafumi, 2022. "Trade costs and free trade agreements: Implications for tariff complementarity and welfare," International Review of Economics & Finance, Elsevier, vol. 78(C), pages 23-37.
    16. Furusawa, Taiji & Konishi, Hideo, 2007. "Free trade networks," Journal of International Economics, Elsevier, vol. 72(2), pages 310-335, July.
    17. Andrey Stoyanov, 2014. "Endogenous Free Trade Agreements and Foreign Lobbying," Review of International Economics, Wiley Blackwell, vol. 22(3), pages 561-577, August.
    18. Saggi, Kamal & Wong, Woan Foong & Yildiz, Halis Murat, 2017. "Preferential Trade Agreements and Rules of the Multilateral Trading System," MPRA Paper 76330, University Library of Munich, Germany.
    19. Jihwan Do & Nicolás Riquelme, 2024. "Information exchange through secret vertical contracts," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(3), pages 671-707, November.
    20. Baybars Karacaovali, 2010. "Free Trade Agreements and External Tariffs," Fordham Economics Discussion Paper Series dp2010-03, Fordham University, Department of Economics.
    21. Stoyanov, Andrey & Yildiz, Halis Murat, 2015. "Preferential versus multilateral trade liberalization and the role of political economy," European Economic Review, Elsevier, vol. 80(C), pages 140-164.

    More about this item

    Keywords

    preferential trade agreements; customs union; political economy; lobbying; asymmetric information;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fea:wpaper:09_01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bruno Vizona Liberato (email available below). General contact details of provider: https://edirc.repec.org/data/fruspbr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.