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Protection for Sale with Price Interactions and Incomplete Pass-Through

Barbara Annicchiarico () and Enrico Marvasi

No 435, CEIS Research Paper from Tor Vergata University, CEIS

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 demand characteristics 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)
New Economics Papers: this item is included in nep-com, nep-int and nep-pol
Date: 2018-06-08, Revised 2018-06-08
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Working Paper: Protection for Sale with Price Interactions andIncomplete Pass-Through (2019) Downloads
Working Paper: Protection for Sale with Price Interactions and Incomplete Pass-Through (2018) Downloads
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