ON THE ENDOGENOUS CHOICE BETWEEN PROTECTION AND PROMOTION

Devashish Mitra ()

Chapter 11 in The Political Economy of Trade Policy:Theory, Evidence and Applications, 2016, pp 201-219 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In a model of strategic interaction between firms in lobbying activity, I show that capitalists might prefer tariffs (protection) to production subsidies (promotion). This is due to the congestion problem arising from the government's convex welfare costs of providing subsidies as opposed to both the free-rider problem and the congestion problem acting in opposite directions in the case of tariffs. If an industry association exists, coordination can be achieved when lobbying for tariffs, but not in the case of production subsidies.

Keywords: Political Economy; Protection; Trade Policy; Tariffs; Subsidies; Reciprocal Trade Liberalization; Unilateral Trade Liberalization; Unilateralism; Reciprocity; Lobbying; Median Voter Models (search for similar items in EconPapers)
Date: 2016
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Journal Article: On the Endogenous Choice between Protection and Promotion (2000)
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