The political economy of protection in GVCs: Evidence from Chinese micro data

Anna Maria Mayda, Rodney Ludema, Zhi Yu and Miaojie Yu

No 14156, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper explores the political economy of import protection in a setting where imports may contain a country’s own domestic value added (DVA) via domestically produced inputs that get exported and used in foreign downstream production. We show that import-competing producers and their domestic input suppliers are generally allies in favor of protection, but this alliance weakens as DVA increases, because a home tariff on finished goods decreases foreign demand for home inputs. Empirically, we examine detailed discriminatory trade policies of 23 countries toward China and use Chinese transaction-level processing trade data to construct a measure of DVA. We also measure input customization. We find that both upstream and downstream political organization increase downstream protection, but the effect of the former is smaller when DVA as a share of final imports from China is larger. Tariffs on products containing inputs that are neither customized nor politically organized appear to be unaffected by the DVA share.

Keywords: Trade policy; Lobbying; Global value chains (search for similar items in EconPapers)
JEL-codes: F10 F13 F14 (search for similar items in EconPapers)
Date: 2019-11
New Economics Papers: this item is included in nep-int, nep-pol and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The political economy of protection in GVCs: Evidence from Chinese micro data (2021)
Working Paper: The political economy of protection in GVCs: Evidence from Chinese micro data (2018)
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