India's Trade Policy For Sale: How Much? Who Buys?

Olivier Cadot (), Grether, Jean-Marie and Marcelo Olarreaga ()

No 4168, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This Paper proposes a new method to test the Grossman-Helpman model of endogenous protection and lobby formation. This method, which does not require outside data on lobbies or contributions, identifies politically organized industries for trade protection purposes and calculates equilibrium contributions directly from the model using structural parameter estimates. Its emphasis on vertical inter-industry linkages makes it also possible to trace the effects of duty drawbacks and counter-lobbying from downstream users on endogenous protection. Applied to India, it yields results that are qualitatively consistent with the model’s predictions and that seem quantitatively more plausible than estimates given for the US by alternative methods. The weight on social welfare in the government’s objective function is 5, and the average contribution per ISIC sector is $33 million.

Keywords: India; political economy; protection (search for similar items in EconPapers)
JEL-codes: F10 F11 F13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: Written
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