Import Protection Bias

9 Pages Posted: 2 Apr 2008

See all articles by Paul Pecorino

Paul Pecorino

University of Alabama - Department of Economics, Finance and Legal Studies

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Abstract

Rodrik (1995) notes that trade regimes tend to be biased towards import protection, while the standard political economy models either yield no prediction on the bias of the trade regime or predict, counter-factually, a bias towards the export sector. This constitutes an important shortcoming in the political economy of trade literature. In this paper, the Grossman and Helpman (1994) Protection for Sale model is extended by adding government expenditure. This expenditure may be financed via a combination of tariff revenue and a distorting wage tax. In addition to the government expenditure, export subsidies need to be financed either via tariff revenue or a distorting wage tax. With this addition, plausible values of the model's parameters yield import protection bias.

Suggested Citation

Pecorino, Paul, Import Protection Bias. Review of International Economics, Vol. 16, Issue 2, pp. 341-349, May 2008, Available at SSRN: https://ssrn.com/abstract=1115545 or http://dx.doi.org/10.1111/j.1467-9396.2007.00717.x

Paul Pecorino (Contact Author)

University of Alabama - Department of Economics, Finance and Legal Studies ( email )

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