Trade Policy with Intermediate Uses of Goods

Carl-Johan Belfrage

Rivista di Politica Economica, 2003, vol. 93, issue 1, 217-252

Abstract: We show that input-output linkages are important when trade policies and political contributions are determined by special interest politics as in the standard model of “protection for sale”. The ability of industry-specific special interests to bid for lower input prices implies that net rather than gross output is what matters to the level of protection enjoyed by an industry and ex-plains the empirical regularity of tariff escalation. Furthermore, stronger input-output linkages imply greater incentives to organize and stronger competition for policy favors and therefore larger aggregate political contributions in return for a given policy.

JEL-codes: D78 F13 (search for similar items in EconPapers)
Date: 2003
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