Working Paper: NBER ID: w11371
Authors: Kishore Gawande; Pravin Krishna; Marcelo Olarreaga
Abstract: Competition between opposing lobbies is an important factor in the endogenous determination of trade policy. This paper investigates empirically the consequences of lobbying competition between upstream and downstream producers for trade policy. The theoretical structure underlying the empirical analysis is the well-known Grossman-Helpman model of trade policy determination, modified suitably to account for the cross-sectoral use of inputs in production (itself a quantitatively significant phenomenon with around 50 percent of manufacturing output being used by other sectors rather than in final consumption). Data from more than 40 countries are used in our analysis. Our empirical results validate the predictions of the theoretical model with lobbying competition. Importantly, accounting for lobbying competition also alters substantially estimates of the"welfare-mindedness" of governments in setting trade policy.
Keywords: lobbying; trade policy; interest groups; endogenous protection
JEL Codes: D72; D78; F12; F13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Lobbying competition (D72) | Trade policy (F13) |
| Increased lobbying competition (L49) | Lower tariffs (F19) |
| Lobbying competition (D72) | Welfare-mindedness of governments (I38) |
| Trade policy (F13) | Welfare-mindedness of governments (I38) |