Protectionist Lobbying and Strategic Investment

Richard Damania ()
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Richard Damania: School of Economics, University of Adelaide, Australia

No 2002-36, Centre for International Economic Studies Working Papers from University of Adelaide, Centre for International Economic Studies

Abstract: Why are some uncompetitive industry sectors so effective in lobbying for greater protection and support? This paper attempts to explain the lobbying success of these industries in terms of the strategic role of investment in technology as a credible commitment device. By eschewing potentially profitable investment opportunities firms credibly signal to the government that the cost of a tariff reduction will be substantial. This enables the firms to lobby more effectively for policy concessions Political considerations may therefore provide a significant incentive for firms to reject investment in newer technologies, even when these lower production costs.

Keywords: Tariffs; Investment; Lobbying (search for similar items in EconPapers)
JEL-codes: D70 F13 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2002-11
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