Lobbying competition over trade policy

Kishore Gawande, Pravin Krishna and Marcelo Olarreaga ()

No 7305, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Competition between opposing lobbies is an important factor in the endogenous determination of trade policy. This paper investigates empirically the consequences of lobbying competition between upstream and downstream producers for trade policy. The theoretical structure underlying the empirical analysis is the well-known Grossman-Helpman model of trade policy determination, modified suitably to account for the cross-sectoral use of inputs in production (itself a quantitatively significant phenomenon with around 50 percent of manufacturing output being used by other sectors rather than in final consumption). Data from more than 40 countries are used in our analysis. Our empirical results validate the predictions of the theoretical model with lobbying competition. Importantly, accounting for lobbying competition also alters substantially estimates of the "welfare-mindedness" of governments in setting trade policy.

Keywords: Interest groups; Intermediate goods; Lobbies; Political Economy; Trade policy (search for similar items in EconPapers)
JEL-codes: D72 D78 F12 F13 F14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cdm, nep-int and nep-pol
Date: 2009-05

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Working Paper: Lobbying Competition Over Trade Policy (2005)
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