Protection for Free? The Political Economy of U.S. Tariff Suspensions

Rodney Ludema, Anna Maria Mayda and Prachi Mishra

No 7926, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies the political influence of individual firms on Congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tariff suspension bills and lobbying expenditures from 1999-2006, and find that indeed verbal opposition by import-competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by proponent and opponent firms sway this probability in opposite directions.

Keywords: Cheap talk; Endogenous protection; Tariff suspensions (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2010-07
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Citations: View citations in EconPapers (11)

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Working Paper: Protection for Free? the Political Economy of U.S. Tariff suspensions (2010)
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