Protection Versus Promotion: An Empirical Investigation
16 Pages Posted: 22 Jul 2004
Using Turkish industry-level data from 1983 to 1990, we find that politically organized industries receive both higher protection and promotion than unorganized ones. Tariff rates are decreasing (increasing) in the import-penetration ratio and the absolute value of the import-demand-elasticity for organized (unorganized) industries. Subsidy rates are decreasing (increasing) in the output-supply elasticity for organized (unorganized) industries. The results are consistent with the predictions of the Grossman-Helpman model and its extension in this paper. The mix of protection and promotion is inversely related to the ratio of their respective marginal deadweight cost measures.
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