Enlargement and Common External Tariff in a Political-Economic Model of Customs Union

18 Pages Posted: 1 Jul 2008

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

Date Written: June 30, 2008

Abstract

We present a model with three blocks of nations: two of the blocks are members of a Customs Union (CU) and maintain a common external tariff (CET) on the third (non member). One of the member blocks is a block of new entrants. The producing lobby is assumed to be union-wide and lobbies governments of both blocks to influence the CET. The CET is determined jointly by the CU. We follow the political support function approach, where the CU seeks to maximize a weighted sum of the constituents' payoff functions. In this framework, we find the relationship between the CET and the average level of capital stock owned by the protected sector in the block of new entrants. We find that the CET is unambiguously larger if the new entrants have a larger stock of capital.

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

JEL Classification: F13

Suggested Citation

Bandyopadhyay, Subhayu and Lahiri, Sajal and Roy, Suryadipta, Enlargement and Common External Tariff in a Political-Economic Model of Customs Union (June 30, 2008). Available at SSRN: https://ssrn.com/abstract=1153544 or http://dx.doi.org/10.2139/ssrn.1153544

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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