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When is it Optimal to Delegate: The Theory of Fast-track Authority

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  • Levent Celik
  • Bilgehan Karabay
  • John McLaren

Abstract

With fast-track authority (FTA), the US Congress delegates trade-policy authority to the President by committing not to amend a trade agreement. We suggest an interpretation in which Congress uses FTA to forestall destructive competition between its members for protectionist rents. We show that FTA is never granted if an industry is operating in the majority of districts. Second, the more equally distributed are the industries across districts and the more similar are the industries' sizes, the more likely it is that FTA is granted. This is true since competition over rents is most punishing when bargaining power is symmetrically distributed, and in that case the ex ante expected welfare of each district is lower without FTA. Third, if existing levels of protection are very different across industries, even if FTA is granted, it may not lead to free trade because a majority of industries may prefer the status quo to free trade.

Suggested Citation

  • Levent Celik & Bilgehan Karabay & John McLaren, 2012. "When is it Optimal to Delegate: The Theory of Fast-track Authority," NBER Working Papers 17810, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:17810
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    References listed on IDEAS

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    Cited by:

    1. Celik, Levent & Karabay, Bilgehan & McLaren, John, 2020. "Fast-track authority: A hold-up interpretation," Journal of International Economics, Elsevier, vol. 127(C).
    2. T. Renee Bowen, 2015. "Legislated Protection And The World Trade Organization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56(4), pages 1349-1384, November.
    3. Levent Celik & Bilgehan Karabay, 2011. "A Note on Equilibrium Uniqueness in the Baron-Ferejohn Model," CERGE-EI Working Papers wp440, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    4. Celik, Levent & Karabay, Bilgehan & McLaren, John, 2013. "Trade policy-making in a model of legislative bargaining," Journal of International Economics, Elsevier, vol. 91(2), pages 179-190.
    5. Gleason Judd & Lawrence S. Rothenberg, 2020. "Flexibility or Stability? Analyzing Proposals to Reform the Separation of Powers," American Journal of Political Science, John Wiley & Sons, vol. 64(2), pages 309-324, April.
    6. Che, Yi & Xiao, Rui, 2020. "Import competition, fast-track authority and U.S. policy toward China," Journal of Comparative Economics, Elsevier, vol. 48(4), pages 974-996.
    7. Xiangjun Ma & John McLaren, 2018. "A Swing-State Theorem, with Evidence," NBER Working Papers 24425, National Bureau of Economic Research, Inc.
    8. Levent Celik & Bilgehan Karabay, 2016. "Veto players and equilibrium uniqueness in the Baron–Ferejohn model," Theory and Decision, Springer, vol. 81(1), pages 33-52, June.

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    More about this item

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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