Lobbying Competition Over Trade Policy

28 Pages Posted: 15 Jul 2009

See all articles by Kishore Gawande

Kishore Gawande

University of Texas at Austin

Pravin Krishna

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS); Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Marcelo Olarreaga

University of Geneva; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: May 2009

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: Interest groups, Intermediate goods, Lobbies, Political Economy, Trade policy

JEL Classification: D72, D78, F12, F13, F14

Suggested Citation

Gawande, Kishore and Krishna, Pravin and Olarreaga, Marcelo, Lobbying Competition Over Trade Policy (May 2009). CEPR Discussion Paper No. DP7305. Available at SSRN: https://ssrn.com/abstract=1433901

Kishore Gawande

University of Texas at Austin ( email )

2317 Speedway
Austin, TX 78712
United States

Pravin Krishna (Contact Author)

Johns Hopkins University - Paul H. Nitze School of Advanced International Studies (SAIS) ( email )

1740 Massachusetts Avenue, NW
Washington, DC 20036-1984
United States

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Marcelo Olarreaga

University of Geneva ( email )

40 Boulevard du Pont-d'Arve
Genève, CH - 1205
Switzerland

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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