Free-Riding on Federalism: Trade Protection and the Canadian Dairy Industry

Kathy Baylis and Hartley Furtan

Canadian Public Policy, 2003, vol. 29, issue 2, 145-161

Abstract: This paper examines the link between federalism, rent-seeking and free-riding behaviour. Using data from the Canadian dairy industry, we test four hypotheses of the determinants of rent-seeking expenditure and the role of free-riding. First, we find that provinces do not cooperate with each other when lobbying the federal government for trade protection. Second, some provinces are found to free ride on the rent-seeking expenditure of the larger (more influential) provinces. Third, the cost of rent-seeking increases when the federal government is forced to make a decision regarding the future of the protectionist policies. Fourth, institutional changes under the 1994 GATT raised the rent-seeking cost of maintaining protectionist policies.

Date: 2003
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