Protection for Free? The Political Economy of U.S. Tariff Suspensions

47 Pages Posted: 26 Jul 2010

See all articles by Rodney D. Ludema

Rodney D. Ludema

Georgetown University - Department of Economics

Anna Maria Mayda

Georgetown University - Department of Economics; IZA Institute of Labor Economics

Prachi Mishra

International Monetary Fund (IMF) - Research Department

Multiple version iconThere are 2 versions of this paper

Date Written: July 2010

Abstract

This paper studies the political influence of individual firms on Congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tariff suspension bills and lobbying expenditures from 1999-2006, and find that indeed verbal opposition by import-competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by proponent and opponent firms sway this probability in opposite directions.

Keywords: cheap talk, endogenous protection, Tariff suspensions

JEL Classification: F13

Suggested Citation

Ludema, Rodney D. and Mayda, Anna Maria and Mishra, Prachi, Protection for Free? The Political Economy of U.S. Tariff Suspensions (July 2010). CEPR Discussion Paper No. DP7926. Available at SSRN: https://ssrn.com/abstract=1647505

Rodney D. Ludema (Contact Author)

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States
202-687-1429 (Phone)
202-687-6102 (Fax)

Anna Maria Mayda

Georgetown University - Department of Economics ( email )

Washington, DC 20057
United States

IZA Institute of Labor Economics

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

Prachi Mishra

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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