Protection for Sale Under Monopolistic Competition: An Empirical Investigation

Pao-Li Chang () and Myoung-jae Lee

No 18-2006, Working Papers from Singapore Management University, School of Economics

Abstract: This paper proposes a general empirical framework to estimate the protection-for-sale model, where the protection regime shifts according to a sector's market structure (perfectly or monop-olistically competitive). We base the protection structure on Grossman and Helpman (1994) for the subset of perfectly competitive sectors and on Chang (2005) for the subset of monop- olistically competitive sectors. The two protection regimes are simultaneously estimated with joint constraints. The results of the J-test consistently reject the homogeneous (perfect compe- tition) protection-for-sale model often adopted in previous literature and suggest a direction of improvement toward the proposed heterogeneous protection structure model.

Keywords: endogenous trade policy; campaign contribution; monopolistic competition; intrain- dustry trade; import penetration (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2006-08
New Economics Papers: this item is included in nep-int, nep-pol and nep-sea
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Published in SMU Economics and Statistics Working Paper Series

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Working Paper: Protection for Sale Under Monopolistic Competition: An Empirical Investigation (2006)
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