Protection for sale under monopolistic competition: Beyond the CES

Barbara Annicchiarico () and Enrico Marvasi

European Journal of Political Economy, 2019, vol. 60, issue C

Abstract: We extend the protection for sale model of Grossman and Helpman (1994) by introducing a general model of monopolistic competition with variable markups and incomplete pass-through. We show that the structure of protection emerging in the political equilibrium not only depends on the weight attached by the government to consumer welfare when making its policy decision, but also on the degree of market power of firms and on the terms-of-trade variations due to the degree of pass-through. Our results highlight the importance of preferences in shaping the structure of protection and are consistent with the occurring of protectionism also in unorganized industries.

Keywords: Protection for sale; Monopolistic competition; Incomplete pass-through; Endogenous markups (search for similar items in EconPapers)
JEL-codes: F12 F13 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:poleco:v:60:y:2019:i:c:s0176268019300096

DOI: 10.1016/j.ejpoleco.2019.06.003

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