Protection for Sale with Imperfect Rent Capturing
36 Pages Posted: 25 May 2006 Last revised: 30 Dec 2012
Date Written: April 2005
Structurally estimating the Grossman and Helpman (1994) model using coverage ratios that include non-tariff barriers leads to biased parameter estimates. We develop a "protection for sale" theoretical framework consistent with the data, by explicitly allowing for non-tariff barriers. Introducing partial rent capturing we obtain a testable specification which finds support in the data. Our results suggest that average rent capturing is in the order of 72-75 percent.
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