Costly Revenue-Raising and the Case for Favoring Import-Competing Industries

Xenia Matschke

No 2005-28, Working papers from University of Connecticut, Department of Economics

Abstract: A standard finding in the political economy of trade policy literature is that we should expect export-oriented industries to attract more assistance than import-competing industries. In reality, however, trade policy is heavily biased toward supporting import industries. This paper shows how the costliness of raising revenue via taxation makes trade subsidies less desirable and trade taxes more desirable in a standard protection for sale framework. The model is then estimated and its predictions tested using U.S. tariff data. An empirical estimate of the costliness of revenue-raising is also obtained.

Keywords: Protection for sale; tariffs; trade policy; costly taxation; political economy (search for similar items in EconPapers)
JEL-codes: F13 F16 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005-06, Revised 2007-04
New Economics Papers: this item is included in nep-pol
Note: I thank the co-editor Kala Krishna and two anonymous referees for comments that greatly improved this paper. Thanks also go to Kishore Gawande and Daniel Trefler for providing data and to Emily Blanchard, Dhammika Dharmapala, Josh Ederington, Kishore Gawande, Susumu Imai, Mary Lovely, Giovanni Maggi, Devashish Mitra, Paul Pecorino, Bob Staiger, Gautam Tripathi, and Christian Zimmermann for helpful comments on an earlier version of this paper. The hospitality of Hans-Werner Sinn and the CES-ifo Institute at the Ludwig-Maximilians University in Munich, where part of this research was conducted, is gratefully acknowledged.
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https://media.economics.uconn.edu/working/2005-28r.pdf Full text (revised version) (application/pdf)
https://media.economics.uconn.edu/working/2005-28.pdf Full text (original version) (application/pdf)

Related works:
Journal Article: Costly revenue-raising and the case for favoring import-competing industries (2008)
Working Paper: Costly Revenue-Raising and the Case for Favoring Import-Competing Industries (2005)
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