Political Asymmetry and Common External Tariffs in a Customs Union

30 Pages Posted: 2 Jul 2008 Last revised: 19 Jul 2010

See all articles by Subhayu Bandyopadhyay

Subhayu Bandyopadhyay

Federal Reserve Bank of St. Louis - Research Division; IZA Institute of Labor Economics; West Virginia University

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Suryadipta Roy

Lawrence University - Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 16, 2010

Abstract

This paper examines the effect of political and economic asymmetries in the formation of common external tariffs (CETs) in a customs union (CU). We do so by introducing possible cross-border lobbying and by endogenizing tariff formation in a political economic model for the determination of CETs. The latter allows us to consider asymmetries among the member nations in their susceptibilities to lobbying. We also consider asymmetries in the influence of the member nations in CU-wide decision-making. A central finding of this paper is that, in the absence of economic asymmetry, the CET rises monotonically with the degree of asymmetry in country influences if the two countries are equally susceptible to lobbying. If influences are the same, the CET also rises monotonically with the degree of asymmetry in susceptibilities. These results hold irrespective of whether the lobby groups in the two member countries cooperate or work non-cooperatively.

Keywords: Asymmetry, Customs union, Common external tariff, Politics

JEL Classification: F13

Suggested Citation

Bandyopadhyay, Subhayu and Lahiri, Sajal and Roy, Suryadipta, Political Asymmetry and Common External Tariffs in a Customs Union (July 16, 2010). Available at SSRN: https://ssrn.com/abstract=1153509 or http://dx.doi.org/10.2139/ssrn.1153509

Subhayu Bandyopadhyay (Contact Author)

Federal Reserve Bank of St. Louis - Research Division ( email )

411 Locust St
PO Box 442
St. Louis, MO 63011
United States

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

West Virginia University ( email )

Morgantown, WV 26506-6025
United States
304-293-7879 (Phone)
304-293-7061 (Fax)

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

Suryadipta Roy

Lawrence University - Economics ( email )

Appleton, WI 54912
United States

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