collusion collective action and protection theory and evidence this paper provides a novel explanation forthe formation of protectionist lobby groupsin imperfectly competitive sectors thelevel of collusion is shown to be a crucialdeterminant of the ability of firms tosustain lobbying we show that greatercollusion reduces firm contributionsto tariff lobbying when the governmentvalues welfare sufficiently and thecross price elasticity between the domesticand foreign goods is sufficiently high the empirical evidence from the u s supports the theory greater collusionreduces the level of pac contributions

energy market liberalization and renewable energy policies in oecd countries abstract this paper investigates the effect of energy liberalization compared to other drivers on policies that support renewable energy in a long panel of oecd countries we estimate this effect by accounting for the endogeneity of liberalization related to joint decisions within a country s energy strategy using regulation in other industries as instruments we find that energy liberalization increases public support for renewable energy the effect of liberalization is the second largest after the effect of per capita income and is mostly driven by reductions in entry barriers while the effect of privatization is unclear this finding suggests that a reduction in the monopolistic power of state owned utilities has a positive effect on renewable energy policies when various types of actors are ensured access to the grid instead of it being provided to only a few large private firms

the silent success of customs unions an earlier version of this paper is part of arevik gnutzmann mkrtchyan s thesis essays on the economics of trade agreements 2014 http hdl handle net 1814 34561

common agency and coordination general theory and application to government policy making we develop a model of common agency with complete information and general preferences with nontransferable utility and we prove that the principals nash equilibrium in truthful strategies implements an efficient action we apply this theory to the construction of a positive model of public finance where organized special interests can lobby the government for consumer and producer taxes or subsidies and targeted lump sum taxes or transfers the lobbies use only the nondistorting transfers in their noncooperative equilibrium but their intergroup competition for transfers turns into a prisoners dilemma in which the government captures all the gain that is potentially available to the parties

optimum discriminatory tariffs under oligopolistic competition this paper attempts to present a simple cournot model to determine the optimal discriminatory tariff rates when the international market is a homogeneous heterogeneous product market in the model there are two foreign firms located in two different countries competing for sales in a local market when the firms sell a homogeneous product and the home country can impose differential tariffs on imports from different countries then the tariff on the low cost producer should be hgher in particular with constant marginal costs the tariff difference should equal half the cost difference on the other hand if the firms sell differentiated products with symmetric linear demands and technologies then the weaker the degree of product differentiation the greater is the tariff difference compared with the cost difference

trade policy of a free trade agreement in the presence of foreign lobbying abstract this paper studies the effect of foreign lobbies on trade policy of a country which is a member of a free trade agreement fta it uses a monopolistically competitive political economy model in which the government determines external tariffs endogenously the effect of foreign lobbying under the fta is examined empirically using canadian industry level trade data that allow differentiating of lobby groups by the country of origin the analysis suggests that the presence of foreign lobbying has a significant effect on the domestic trade policy the heterogeneity of foreign lobbies is also important the presence of an organized lobbying group in an fta partner country tends to raise trade barriers while an organized lobbying group of exporters from outside of the fta is associated with less protection

will digital technologies transform agriculture in developing countries mobile phones and the internet have significantly affected practically all sectors of the economy and agriculture is no exception building on a recent world bank flagship report this article introduces a concise framework for describing the main benefits from new information and communication technologies they promote greater inclusion in the broader economy raise efficiency by complementing other production factors and foster innovation by dramatically reducing transaction costs the article reviews the recent literature on corresponding technology impacts in the rural sector in developing countries digital technologies overcome information problems that hinder market access for many small scale farmers increase knowledge through new ways of providing extension services and they provide novel ways for improving agricultural supply chain management while there are many promising examples of positive impacts on rural livelihoods or digital dividends these have often not scaled up to the extent expected the main reason is that technology can always only address some but not all of the barriers faced by farmers in poorer countries

endogenous free trade agreements and the multilateral trading system i evaluate in this paper the impact of free trade areas ftas on the world trading system i use an oligopolistic political economy model where the external tariffs of fta members as well as the decision to form ftas are endogenously determined in this context i show that ftas are primarily beneficial to the multilateral trading system this conclusion is based first upon the finding that ftas induce their member governments to lower their external tariffs and to do so deeply enough to enhance trade even between fta members and non members while this ensures gains for the latter in general fta members may not gain i show however that governments will endorse only welfare improving arrangements in spite of their political motivations as a result fta members benefit from ratified arrangements as well finally i find that ftas by reducing the role of special interests criteria in governments trade regime decisions also tend to enhance support for further liberalization at the multilateral level

discriminatory tariffs and international negotiations abstract recent research has highlighted the efficiency of the mfn principle within the gatt wto structure this paper analyzes the exception made to mfn within article xxiii that allows discriminatory punishment for deviations from the agreement we argue that in the absence of collusion the mfn exception reduces the severity of punishment and thus lowers the level of cooperation that can be achieved by the agreement however discriminatory punishment may still be beneficial as we show that it reduces the problems associated with the potential for renegotiation during the punishment phase finally we argue that our results are also applicable to the question of whether to use trade policy sanctions as a means of enforcing agreements covering domestic policies

self enforcing trade agreements and lobbying abstract in an environment where international trade agreements must be enforced via promises of future cooperation the presence of an import competing lobby has important implications for optimal punishments when lobbies work to disrupt trade agreements a nash reversion punishment scheme must balance two conflicting objectives longer punishments help to enforce cooperation by increasing the government s costs of defecting but because the lobby prefers the punishment outcome this also incentivizes lobbying effort and with it political pressure to break the agreement thus the model generates an optimal length for nash reversion punishments and it depends directly on the political influence of the lobbies trade agreement tariffs are shown to be increasing in the political influence of the lobbies as well as their patience levels

backward stealing and forward manipulation in the wto abstract motivated by the structure of wto negotiations we analyze a bargaining environment in which negotiations proceed bilaterally and sequentially under the most favored nation mfn principle we identify backward stealing and forward manipulation problems that arise when governments bargain under the mfn principle in a sequential fashion we show that these problems impede governments from achieving the multilateral efficiency frontier unless further rules of negotiation are imposed we identify the wto nullification or impairment and renegotiation provisions and its reciprocity norm as rules that are capable of providing solutions to these problems in this way we suggest that wto rules can facilitate the negotiation of efficient multilateral trade agreements in a world in which the addition of new and economically significant countries to the world trading system is an ongoing process

repeated partnership games with imperfect monitoring and no discounting in a partnership game each player s utility depends on the other players actions through a commonly observed consequence e g output profit price which is itself a function of the players actions and an exogenous stochastic environment if a partnership game is repeated infinitely and each player s payoff in the infinite game supergame is the long run average of his expected one period utilities then efficient combinations of one period actions can be sustained as nash equilibria of the supergame even if the players cannot observe other players actions or information but can only observe the resulting consequences

an analysis of the mfn clause under asymmetries of cost and market structure we conduct a welfare comparison of mfn and tariff discrimination in an oligopoly model of trade between two exporting countries and one importing country while mfn dominates tariff discrimination from a world welfare perspective when exporting countries are asymmetric with respect to either cost or market structure such need not be the case when both types of asymmetries co exist in particular when high cost exporters are merged and the cost disadvantage of the merged unit relative to competing firms is of intermediate magnitude tariff discrimination can be welfare preferred to mfn even when the average tariff is actually lower under mfn jel classification f13 f12 une analyse de la clause de la nation la plus favorisee npf quand il y a asymetrie des couts et de la structure de marche ce texte fait une comparaison de bien etre de la clause npf et de la discrimination tarifaire dans un modele oligopolistique de commerce international entre deux pays exportateurs et un pays importateur alors que la strategie npf est superieure a celle de la discrimination tarifaire du point de vue du bien etre mondial quand les pays exportateurs sont asymetriques soit dans leurs couts soit dans la structure du marche tel n est pas necessairement le cas quand les deux types d asymetrie coexistent en particulier quand des exportateurs dont les couts sont eleves sont fusionnes et que le desavantage de couts est d une magnitude moyenne la discrimination tarifaire peut etre preferee a la strategie npf et ce meme quand le droit de douane moyen est en fait plus bas dans un regime npf

policymakers horizon and the sustainability of international cooperation abstract this paper examines the impact of policymakers horizon on the sustainability of international cooperation we describe a prisoners dilemma game between two infinitely lived countries run by policymakers we show that re election incentives can act as a discipline device making it easier to sustain cooperation between policymakers with finite but potentially renewable mandates than between infinitely lived policymakers we also show that when voting suffers from a recency bias policymakers may have incentives to collude to get re elected and term limits may help international cooperation

issue linkage and issue tie in in multilateral negotiations we describe a model of international multidimensional policy coordination where countries can enter into selective and separate agreements with different partners along different policy dimensions the model is used to examine the implications of negotiation tie in the requirement that agreements must span multiple dimensions of interaction for the viability of multilateral cooperation when countries are linked by international trade flows and transboundary pollution we show that while in some cases negotiation tie in has either no effect or can make multilateral cooperation more viable in others a formal tie in constraint can make an otherwise viable joint multilateral agreement unstable

optimal tariffs and the choice of technology discriminatory tariffs vs the most favored nation clause abstract we compare the effects of optimal tariffs on the technology choice of exporters under the discriminatory tariffs regime and the most favored nation mfn clause it is shown that a lower marginal cost mc technology will be chosen in equilibrium under the mfn clause as a result the importing country s long run welfare increases with the adoption of mfn while in most cases the exporting countries welfare decreases however ex post technology choice the importing country prefers discriminatory tariffs this result therefore highlights the role of mfn as a commitment mechanism to resolve a time inconsistency problem facing the importing country

political internalization of economic externalities and environmental policy abstract this paper derives the characteristics of endogenous environmental policy in a common agency model of politics and proceeds to show that competition between lobby groups is an important source of internalization of economic externalities our analysis generalizes bhagwati s principle of targeting to the case of distorted political markets moreover we show that the politically optimal structure of environmental taxes incorporates a pigouvian adjustment however since lobby groups care about the distribution of income as well as about efficiency the equilibrium structure of taxes differs considerably from the pigouvian rule

is the wto passe the wto has delivered policy outcomes that are very different from those likely to emerge out of the recent wave of preferential trade agreements ptas should economists see this as an efficient institutional hand off where the wto has carried trade liberalization as far as it can manage and is now passing the baton to ptas to finish the job this paper surveys a growing economics literature on international trade agreements and argues on this basis that the wto is not passe rather and subject to some caveats this survey of research to date suggests that the wto warrants strong support while a more cautious view of ptas seems appropriate

bilateralism multilateralism and the quest for global free trade abstract we develop an equilibrium theory of trade agreements in which both the degree and the nature bilateral or multilateral of trade liberalization are endogenously determined to determine whether and how bilateralism matters we also analyze a scenario where countries pursue trade liberalization on only a multilateral basis we find that when countries have asymmetric endowments or when governments value producer interests more than tariff revenue and consumer surplus there exist circumstances where global free trade is a stable equilibrium only if countries are free to pursue bilateral trade agreements by contrast under symmetry both bilateralism and multilateralism yield global free trade

the epidemiology of corporate pac formation 1975 1984 abstract most work on corporate political action committees pacs accounts for their formation or activity level in terms of market concentration and collective action dilemmas subsidiary concerns include the effects of regulatory burden and the firm s internal organization however these cross sectional designs yield little insight into the dynamics of the process results of logit and event history analyses of panel data on 119 u s firms from 1975 1984 show that changes in corporate profitability pac formation by other firms in a firm s board of directors interlock network and the degree of managerial dominance of corporate governance also affect the likelihood that a firm will form a pac analyses also reveal important differences in pac formation dynamics across different types of firms particularly in their response to pac formation by linked firms

preferential versus multilateral trade liberalization and the role of political economy abstract in this paper we analyze the effect of the freedom to pursue preferential trade liberalization permitted by article xxiv of the gatt on country s incentives to participate in multilateral negotiations and on feasibility of global free trade we present a model in which countries choose whether to participate in preferential or multilateral trade agreements under political pressures from domestic special interest groups we show that heterogeneity in political preferences across countries plays an important role in determining the relative merits of preferential and multilateral approaches to trade liberalization on one hand the opportunity to liberalize preferentially may be necessary to induce countries with strong political motivations to participate in multilateral free trade negotiations on the other hand when countries share similar political preferences multilateral free trade that would have been politically supported otherwise becomes unattainable if countries can pursue preferential liberalization

rent seeking and market structure comment if the firms in an industry are to be successful in raising money to influence government two conditions must be met 1 there must be sufficient rents available from government decisions regarding that industry to make such expenditures worthwhile and 2 the industry must be sufficiently concentrated to avoid a free rider problem in fund raising this argument though seemingly intuitively appealing has been under recent empirical attack this paper seeks to restore the parapets

the fourth industrial revolution agricultural and rural innovation and implications for public policy and investments a case of india the indian government and public private partnerships are developing and disseminating a dizzying number of innovative networked solutions broadly known as the digital india initiative to increase the efficiency of safety nets and worker productivity and to improve life yet challenges to turn the power of information and other technologies into a farmer friendly technological revolution for india s 156 million rural households are considerable including 1 reliable up to date location specific message content for a diverse agriculture to help stratified households shift to productive knowledge intensive agriculture as a business government private sector and civil society have big roles to play 2 digital literacy i e teaching farmers how to choose and use apps even where the digital divide is absent apps are or soon to be in regional languages and 3 monitoring actual use and impacts on users lives by understanding the adoption and adaptation processes these challenges call for bottom up complementary investments in physical human and institutional capital and farmer friendly e platforms while forging ahead with many top down policy and institutional reforms currently underway in which progress is real and constraints holding back greater success are better understood this article is protected by copyright all rights reserved

trade deflection and trade depression this is the first paper to empirically examine whether a country s use of an import restricting trade policy distorts a foreign country s exports to third markets we first develop a theoretical model of worldwide trade in which the imposition of antidumping and safeguard taris or trade remedies by one country causes significant distortions in world trade flows we then empirically test this model by investigating the eect of the united states use of such import restrictions on japanese exports of roughly 4800 products into 37 countries between 1992 and 2001 our estimation yields evidence that us restrictions both deflect and depress japanese export flows to third countries imposition of a us antidumping measure against japan deflects trade as the average antidumping duty on japanese exports leads to a 5 7 increase in japanese exports of the same product to the average third country market the imposition of a us antidumping measure against a third country depresses trade as the average us duty imposed on a third country leads to a 5 19 decrease in japanese exports of that same product to the average third country s market we also document the substantial variation in trade deflection and trade depression across dierent importing countries and exported products

preferential tariffs and the most favoured nation principle a note abstract the aim of this note is to suggest a simple explanation of the need for an international agreement like the most favoured nation m f n principle concerning the uniformity of import tariffs it is shown that preferential import tariffs can be the optimal outcome of non cooperative behaviour by trading countries and therefore it is argued that the existence of the m f n principle reflects the incentive of each country to otherwise pursue discriminatory tariff policies although the m f n principle is well justified in terms of production efficiency its distributional effects favour the more cost efficient countries

the mfn clause welfare and multilateral cooperation between countries of unequal size abstract this paper analyzes mfn in a competing exporters model of trade between three countries with unequal endowments and shows that mfn yields higher aggregate welfare than tariff discrimination even as it makes low income countries worse off furthermore in a repeated game of tariff cooperation multilateral free trade is easier to sustain under mfn punishments relative to discriminatory ones this conclusion holds even when tariff discrimination takes the form of bilateral trade agreements overall the analysis shows that from the viewpoint of low income countries mfn and multilateral tariff cooperation are complementary in nature

a theory of managed trade this paper proposes a theory that predicts low levels of protection during periods of normal trade volume coupled with episodes of special protection when trade volumes surge this dynamic pattern of protection emerges from a model in which countries choose levels of protection in a repeated game facing volatile trade swings high trade volume leads to a greater incentive to defect unilaterally from cooperative tariff levels therefore as the volume of trade expands the level of protection must rise in a cooperative equilibrium to mitigate the rising trade volume and hold the incentive to defect in check copyright 1990 by american economic association

gradualism in free trade agreements a theoretical justification a notable feature of many recent trade agreements is the gradual rather than immediate reduction of trade barriers in this paper we model trade liberalization as a cooperative relationship that evolves gradually in a non cooperative environment we show that specialization capacity irreversibility and the development of trade partner specific capital increase the benefit of continuing the liberalizing relationship and decrease over time the lowest obtainable self enforcing tariff by increasing the penalty of future defection sunk costs ensure that the self enforcing trading relationship starts slowly but once in progress the level of cooperation continues to improve

measuring agricultural knowledge and adoption understanding the trade offs in improving the precision of agricultural measures through survey design is crucial yet standard indicators used to determine program effectiveness may be flawed and at a differential rate for men and women the authors use a household survey from mozambique to estimate the measurement error from male and female self reports of their adoption and knowledge of three practices intercropping mulching and strip tillage despite clear differences in human and physical capital there are no obvious differences in the knowledge adoption and error in self reporting between men and women having received training unanimously lowers knowledge misreports and increases adoption misreports other determinants of reporting error differ by gender misreporting is positively associated with a greater number of plots for men recall decay on measures of knowledge appears prominent among men but not women findings from regression and cost effectiveness analyses always favor the collection of objective measures of knowledge given the lowest rate of accuracy for adoption was around 80 percent costlier objective adoption measures are recommended for a subsample in regions with heterogeneous farm sizes

politically realistic objective functions and trade policy profs and tariffs abstract this paper demonstrates a mathematical correspondence between the deus ex machina tariff formation approach and political economy approach the correspondence implies that the tariff chosen by lobbying influenced policy makers will be equivalent to a tariff chosen by a deus ex machina government that gives too much weight to profits this result allows many political economy issues to be addressed in the simple framework of a deus ex machina government which faces a politically realistic objective function prof

lobbying and international cooperation in tariff setting abstract this paper develops a theory of tariff protection that incorporates cooperative behavior and lobbying governments use import tariffs or subsidies to maximize a weighted sum of lobbying contributions and general welfare governments do not use export taxes or subsidies and thus balance the interests of export and import competing lobbies in setting tariff levels in a symmetric model cooperation between governments is sustained by threats of punishment in future periods unless governments place too much weight on the future the result is a cooperative tariff otherwise the result is a reciprocal import subsidy

feasible multilateralism and the effects of regionalism recent research has underlined the efficiency of the gatt wto rules from the standpoint of politically motivated governments emphasizing that the current multilateral rules are capable of delivering a politically efficient equilibrium such an equilibrium is however economically inefficient global free trade in particular is generally unattainable even in a fully cooperative world provided that governments have distributive motivations in such a context we show that regional trade agreements can help move the world towards a welfare superior equilibrium the reason is that as members of regional trade agreements lower trade barriers against one another they are induced to reduce their multilateral tariff sa s well once we account for these endogenous changes and only then we find that regionalism can raise world welfare even in a fully cooperative but political world we also find however that members are likely to gain too much from regional integration thereby harming outsiders

the effect of the canada us free trade agreement on canadian multilateral trade liberalization in this paper show that the canada us free trade agreement cusfta tariff preferences have triggered a decline in canadian external tariffs explaining a two percentage point reduction in the average tariff between 1989 and 1998 next we found that industries that generate the least export rent to the us firms experienced deeper tariff cuts in canada this result provides evidence of cooperation in trade policies between the us and canada finally we estimate the effect of the cusfta on the intensity of industrial lobbying for trade policy in canada and find no relationship between preferential trade liberalization and lobbying activity resume l effet de l accord de libre echange canada u s sur la liberalisation multilaterale du commerce canadien dans ce texte on montre que les preferences tarifaires de l accord de libre echange canada us alecus ont declenche un declin dans le niveau des droits de douane externes canadiens et expliquent une reduction de deux points de pourcentage dans le tarif moyen entre 1989 et 1998 ensuite on decouvre que les industries qui generent le moins de rentes des exportations vers les etats unis font l experience de reduction de tarifs plus importante au canada ce resultat revele une cooperation dans les politiques commerciales entre canada et etats unis enfin on evalue l effet de l alecus sur l intensite du lobbying industriel a propos de la politique commerciale au canada et on decouvre qu il n existe pas de relation entre la liberation preferentielle du commerce et l intensite de l activite de lobbying

on the formation of industry lobby groups abstract this paper provides a step towards a more complete theory of lobbying extending the menu auction model of grossman and helpman grossman g m helpman e 1994 american economic review 84 833 850 a new explanation is proposed for why more concentrated industries more easily overcome the free rider problem inherent in political collective action instead of focusing on transactions costs as olson olson m 1965 the logic of collective action harvard university press cambridge ma we show that more collusive industries with higher collusive profits have a greater incentive to form lobby groups and to contribute to industry lobbying moreover more polluting industries also have a greater incentive to form and contribute to a lobby group

multilateral tariff cooperation during the formation of free trade areas we consider the impact of the formation of free trade agreements on multilateral tariff cooperation we assume that countries are limited to selfenforcing multilateral arrangements that balance the gains from deviating against the costs of an ensuing trade war we find that the emergence of free trade areas will be accompanied by a temporary retreat from liberal multilateral trade policies as the initial balance supporting multilateral cooperation is upset eventually however as the full impact of the emerging free trade agreement on multilateral trade patterns is felt this initial balance tends to reemerge and liberal multilateral trade policies can be restored

do south south preferential trade agreements undermine the prospects for multilateral free trade due to trade diversion there has been concerns expressed over the proliferation of preferential trade agreements ptas between south countries in this paper we compare welfare across the various forms of bilateral free trade agreements ftas and customs unions cus and examine their implications for the stability of multilateral free trade while north north ptas tend to yield higher welfare we fi nd certain cases where south south agreements are more likely to lead to global free trade than north north or north south agreements but other cases where multilateral cooperation over free trade is the least likely under south south agreements we also examine how the expansion of existing agreements or the combination of separate agreements affects the potential for free trade

the emergence of cooperation among egoists this article investigates the conditions under which cooperation will emerge in a world of egoists without central authority this problem plays an important role in such diverse fields as political philosophy international politics and economic and social exchange the problem is formalized as an iterated prisoner s dilemma with pairwise interaction among a population of individuals results from three approaches are reported the tournament approach the ecological approach and the evolutionary approach the evolutionary approach is the most general since all possible strategies can be taken into account a series of theorems is presented which show 1 the conditions under which no strategy can do any better than the population average if the others are using the reciprocal cooperation strategy of tit for tat 2 the necessary and sufficient conditions for a strategy to be collectively stable and 3 how cooperation can emerge from a small cluster of discriminating individuals even when everyone else is using a strategy of unconditional defection

multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

market structure and campaign contributions does concentration matter a reply economic rents may be obtained through the process of market competition or be obtained by resorting to governmental protection rational firms choose the least costly alternative collusion to obtain governmental protection will be less costly the higher the concentration ceteris paribus however high concentration in itself is neither necessary nor sufficient to induce governmental protection

recurrent trade agreements and the value of external enforcement abstract this paper presents a theory of dynamic trade agreements in which external institutions such as the wto play a central role in supporting credible enforcement in our model countries engage in ongoing negotiations and as a consequence cooperative agreements become unsustainable in the absence of external enforcement institutions by using mechanisms such as delays in dispute resolution and direct penalties enforcement institutions can restore incentives for cooperation despite the lack of coercive power the occurrence of costly trade disputes and the feasibility of mechanisms such as escape clauses depend on the degree to which enforcement institutions can verify and condition on events that may lead to trade disputes

managing the evolution of multilateralism author s downs george w rocke david barsoom peter n abstract in the past five years a relatively extensive literature has emerged that explores the demand for multilateral cooperation that is those factors that motivate states to develop or resist developing formal institutions that operate to increase interstate economic military or environmental cooperation 1 these factors include the transaction costs associated with ad hoc and multiple bilateral arrangements increased interstate trade the diffusion of liberal trade theory information about the costs of environmental degradation and trends in elite ideology to date however our understanding of the supply side of multilateralism the standards that are set for admission the order and speed with which candidate states are admitted and the impact of expansion on cooperation and future evolution has been relatively undeveloped 2 partly as a result theorists have had little to say about how multilateral institutions are likely to evolve or what the policy consequences of their expansion will be 3 supply side issues are important because multilateral organizations usually do not spring forth full blown they grow instead of forming an inclusive agreement that is one that covers nearly all of the states that its designers eventually hope to include many multilateral organizations start out with substantially smaller memberships and generally expand over time we argue that among the many possible explanations for the choice of this design strategy there is a rational choice argument

interest group size and legislative lobbying abstract we develop a model of legislative decision making in which lobbying and public policy are jointly determined we examine how policy outcomes depend on the sizes of the interest groups while a larger size typically involves favorable effects on policy we also identify threshold levels of interest group size where a lobby will be harmed if it becomes larger this may provide another rationale as to why some interests do not or not fully organize spending limits can remove adverse policy effects of interest group size however this is not necessarily welfare improving moreover we find that endogenous proposal making may turn a second mover advantage in standard legislative lobbying models into a second mover disadvantage

dynamic tariffs with asymmetric information recent developments in dynamic game theory are applied to determine when two countries can sustain freer trade given that they determine trade policies non cooperatively countries know their own level of protection but not the other country s level of protection using import trigger strategies cooperation in the form of low tariffs can be supported although there are periodic reversionary high tariff episodes however if terms of trade trigger strategies are used cooperation does not occur

preferential trade agreements and antidumping protection abstract are preferential trade agreements ptas stumbling blocks or building blocks towards multilateral trade liberalization we address this question by investigating the effects of the negotiation and implementation of ptas on the use of antidumping ad i e the most common form of contingent trade protection by member countries against non members as there has been a concurrent surge in regionalism and ad activity since the 1990s theoretically derived empirical predictions are supported by the empirical analysis based on the 15 most intense users of ad the results demonstrate that both the negotiation and the implementation of ptas lead to fewer ad measures against non member countries except for members of customs union agreements in force facing large import surges from non members thus our results highlight a building block effect of ptas on multilateral trade cooperation when it comes to ad protection

can bilateral trade agreements help induce free trade there has been growing debate about whether bilateral trade agreements are damaging multilateral efforts to eliminate barriers to international trade this paper develops a model in which trading blocs always charge optimal tariffs and make trade agreements based on strategic considerations we ask a very simple question does the fact that trading blocs can form bilateral trade agreements make free trade less likely to occur the answer is that it depends on the size distribution of the trading blocs if there is one large trading bloc along with some smaller ones then bilateral trade agreements allow the smaller trading blocs to coalesce and block the monopoly power of large trading blocs in this case bilateral trade agreements facilitate the attainment of free trade not allowing customs unions leads to more not less protection if trading blocs are of roughly equivalent size then bilateral trade agreements allow groups of trading blocs to more effectively monopolize world trade in which case they may make free trade less likely these results suggest that a policy that inhibits the formation of trading blocs may be harmful we also compute the welfare effects of trade agreements to get some idea of how empirically important these issues are

polluters and collective action theory and evidence 1 introductionthe seminal theory by olson 1965 predicts that industries with fewer firms have a greater ability to undertake collective action they organize cooperative political action more easily because greater concentration lowers the cost of political action 1 the empirical evidence is inconclusive however andres 1985 masters and keim 1985 heywood 1988 and humphries 1991 find positive effects of industry concentration on the probability of making political action committee pac contributions see also mckeown 1994 pittman 1976 finds that concentrated industries generate greater contribution levels grier munger and roberts 1991 find an inverted u shaped relationship between the level of pac formation and industry concentration with a maximum political participation rate occurring at a four firm concentration ratio around 0 45 esty and caves 1983 and zardkoohi 1985 report ambiguous effects of concentration on pac contributions 2in this paper we suggest an alternative perspective on firms ability to organize collective action which to our knowledge has been ignored so far the novel argument is that industries that face multiple regulations a greater number of policy issues find it easier to overcome collective action problems and sustain lobbying in particular we focus on the difference between firms in polluting and clean industry sectors using a simple repeated game framework similar to spagnolo 2000 we argue that firms in industries that are naturally polluting because of their input requirements and therefore incur pollution abatement costs will face an additional policy battle compared with other industries everything else equal 3 this enables such industries to sustain greater cooperation and lobbying this is because firms seeking to form a lobby group face a free riding problem due to a limited amount of enforcement power available to punish deviation and ensure cooperation firms that face multiple areas of regulation have an advantage in the formation of lobby groups because they have a greater amount of enforcement power available to reallocate between policy issues when joint lobbying gives large gains in environmental policy this surplus can be reallocated to trade policy for example free riding behavior on trade policy lobbying may more easily be disciplined the prediction that emerges from our theoretical model is that polluting industries are relatively less affected by the free riding problems involved in organizing political action and we thus expect the level of political contributions to be higher in these sectors 4we evaluate this prediction using a cross section data set of u s manufacturing industries our empirical model builds on a multiple equation model by gawande and bandyopadhyay 2000 who test the well established theory of grossman and helpman 1994 on the pattern of protection their theory takes lobby group formation as given we augment gawande and bandyopadhyay s model with an additional equation for environmental policy stringency 5 the empirical results lend support to our theory industry pac contributions and thus the level of lobby group cooperation are greater in industries with larger pollution abatement costs this result is robust to several measures of lobby group formation and environmental policy the present paper contributes to the recent literature on the formation of lobby groups in the area of pollution taxation damania and fredriksson 2000 argue that collusive industries may more easily form lobby groups that oppose such taxes using a related setup damania and fredriksson 2003 discuss the effect of exogenous trade liberalization on environmental policy formation when lobby group formation is endogenous pecorino 1998 and mitra 1999 discuss the formation of trade lobby groups 6 neither of these papers explore the relationship between collective action and the number of policy instruments however

external trade diversion exclusion incentives and the nature of preferential trade agreements in a game of endogenous trade agreements between three countries we show that while the pursuit of customs unions cus prevents global free trade from emerging as a coalition proof nash equilibrium the pursuit of free trade agreements ftas does not this result reflects the relatively flexible nature of ftas whereas each fta member can independently undertake further trade liberalization with respect to the non member cu members must do so as a group due to their common external tariff by diverting members exports away from the non member both types of trade agreements induce the non member to voluntarily lower its import tariffs

the size of trading blocs market power and world welfare effects abstract we construct an n country n commodity trade model to analyze the implications of bloc size for nash equilibrium tariffs and welfare the relationship between the absolute size of symmetric trading blocs and their market power is ambiguous and we illustrate how this relationship varies with model parameters in contrast sufficiently large increases in the relative size of a bloc enhance its relative market power and cause the welfare of its country members to rise above the free trade level we establish the existence of an optimal bloc size and study the dependence of optimal size on the parameters of the model

the role of mfn under asymmetries in environmental standards abstract we critically examine the implications of the most favored nation mfn clause under asymmetric environmental standards using an oligopolistic intra industry trade model we show that environmentally beneficial trade diversion and higher world welfare obtain under tariff discrimination relative to mfn

the ec and protection the political economy this paper surveys the arguments that the creation of the ec has increased world protectionism relative to what it would otherwise have been models of tariff bargaining between trade blocks suggest some increase because the optimum tariff is higher for larger blocks but this is not inevitable models of ec decision taking suggest an increase because of the restaurant bill problem and the tendency of committees towards universalism the evidence is not enough however to be certain that a protectionist effect exists

multilateral tariff cooperation during the formation of customs unions abstract we study the implications of customs union formation for multilateral tariff cooperation we model cooperation in multilateral trade policy as self enforcing in that it involves balancing the current gains from deviating unilaterally from an agreed upon trade policy against the future losses from forfeiting the benefits of multilateral cooperation that such a unilateral defection would imply the early stages of the process of customs union formation are shown to alter this dynamic incentive constraint in a way that leads to a temporary honeymoon for liberal multilateral trade policies we find however that the harmony between customs unions and multilateral liberalization is temporary eventually as the full impact of the emerging customs union becomes felt a less favorable balance between current and future conditions re emerges and the liberal multilateral policies of the honeymoon phase cannot be sustained

ict and agricultural productivity evidence from cross country data this article carries out agricultural production function estimations based on data for the period 1995 2000 on 81 countries to present empirical evidence on the relationship between the adoption of information and communication technology ict and agricultural productivity it is found that new ict has a significantly positive impact on agricultural productivity the evidence suggests that the adoption of modern industrial inputs in agricultural production relies on the information and communication infrastructure however the empirical evidence from this study also suggests that new ict could be a factor for the divergence between countries in terms of overall agricultural productivity not only do we find that the ict adoption levels of the richer countries are much higher than those of the poorer countries but also that returns from ict in agricultural production of the richer countries are about two times higher than those of the poorer countries a plausible explanation for the poorer countries relatively low productivity elasticity of ict is the lack of important complementary factors such as a substantial base of human capital

multi lateral trade negotiations and the most favored nation clause abstract this paper considers the interaction between private information and the most favored nation clause in trade negotiations it demonstrates that by aggregating uncertainty over a number of trading partners the most favored nation clause may offer a welfare improvement over a set of bilateral trade negotiations this improvement is shown to be most pronounced when a large number of countries are involved in negotiations

on the emergence of an mfn club equal treatment in an unequal world motivated by gatt we endogenize the formation of a club whose members have to abide by the mfn principle of non discrimination the underlying model is that of oligopolistic intraindustry trade while an mfn club does not alter average tariff levels across countries it increases aggregate world welfare makes non members worse off and can immiserize its high cost members these results imply that i core wto rules such as mfn are valuable even if multilateral negotiations deliver limited trade liberalization and ii the distributional effects of mfn maybe one reason why developing countries have been granted special and differential treatment at the wto jel classification f13 f10 f15

insecure resources bilateral trade and endogenous predation a game theoretic analysis of conflict and trade this article analyzes how interstate conflict over resources affects the incentives to trade and how greater trade openness affects the endogenous decisions of arming by enemy countries we identify conditions under which there is trade between two adversary countries and show that each adversary s arming affects domestic welfare in three different ways the first is an export revenue effect which increases welfare because arming causes export revenue to go up i e there is an arming induced terms of trade improvement the second is a resource predation effect which increases welfare because arming increases the appropriation of a rival country s resource input to produce a consumption good the third is an output distortion effect which reduces welfare because arming lowers the domestic production of civilian goods based on these effects we show circumstances in which greater trade openness reduces the intensity of arming we also discuss the implications of resource security asymmetry for conflict and trade

trading rules and the environment does equal treatment lead to a cleaner world abstract in this paper we consider a three stage game in the context of a competing exporters model to compare and contrast the effects of discriminatory and uniform most favored nation mfn tariffs on countries choice over environmental standards for varying degrees of pollution spillovers because of the presence of punishment effects and stronger own and cross tariff effects we find that discrimination yields higher standards than mfn and free trade independently of the extent of pollution spillovers when pollution is local and incentives to free ride on other countries abatement efforts are weak we show however that welfare is larger under mfn than under discrimination in a dynamic setting we consider the impact of symmetric and asymmetric treatments on the sustainability of an international environmental agreement iea and obtain that multilateral cooperation is easier to sustain under discrimination than under mfn or free trade

market structure and political influence new data on political expenditures activity and success this paper utilizes new data to evaluate the determinants of the political influence of thirty five manufacturing industries on the u s congress during 1976 80 several measures of influence serve to distinguish between political activity and success seller concentration and geopolitical dispersion increase both activity and success but neither industry size nor leading firm size proves significant we test whether political expenditures facilitate obtaining the favors conferred on an industry by its market structure or by influence independent of that strurture statistical inference strongly confirms both roles

the political economy of pollution taxes in a small open economy abstract this paper develops a positive theory explaining pollution tax policy outcomes in a small open economy the equilibrium tax rate depends on lobby group membership the relative importance of lobbying activities and the tax elasticity of pollution the equilibrium properties are investigated the model is extended to incorporate pollution abatement and a pollution abatement subsidy we show that total pollution may be increasing in the pollution abatement subsidy rate this effect arises because the equilibrium pollution tax rate may be decreasing in the subsidy rate due to altered political influence of the lobby groups in the political equilibrium

tariff bindings and the dynamic formation of preferential trade agreements abstract we show that multilateral tariff binding liberalization substantially impacts the nature and extent of preferential trade agreement pta formation first it shapes the nature of forces constraining expansion of free trade agreements ftas the constraining force is a free riding incentive of fta non members under relatively high bindings but an exclusion incentive of fta members under relatively low bindings second multilateral tariff binding liberalization shapes the role played by ptas in the attainment of global free trade initially tariff binding liberalization leads to custom union cu formation in equilibrium but in a way that undermines the pursuit of global free trade however further tariff binding liberalization leads to fta formation in equilibrium and in a way that facilitates the attainment of global free trade our theoretical analysis also has implications regarding recent empirical discussions over the relative merits of ftas versus cus

trade policy under the gatt wto empirical evidence of the equal treatment rule a fundamental difference between multilateral trade agreements like the gatt and wto and a preferential agreement is the multilateral agreements inclusion of a most favoured nation principle though mfn requires that members implement policies that provide equal treatment to all gatt wto countries how far do members actually follow the mfn principle when so required we empirically investigate a sample of gatt wto trade disputes and the effect of successful dispute settlement negotiations on the disputed product trade of third country exporters to the defendant country we document evidence of trade liberalization consistent with defendant countries successfully applying the equal treatment rule jel classification f13 politique commerciale sous le regime gatt omc resultats empiriques de la regle du traitement equivalent une difference fondamentale entre les accords commerciaux multilateraux comme le gatt ou l omc et un accord preferentiel est que dans le premier cas on fait appel au principe de la nation la plus favorisee meme si ce principe requiert que les membres mettent en place des politiques qui assurent un traitement equivalent a tous les pays de l accord gatt omc reste a savoir jusqu a quel point les membres se soumettent a ce principe quand c est requis ce memoire etudie la question en faisant enquete sur un echantillon de disputes commerciales autour d accords de type gatt omc et sur l effet du succes des negociations dans la resolution de conflit sur le commerce du produit au caeur de la dispute en provenance de pays tiers exportant vers le pays qui se defend on montre que les resultats de la liberalisation du commerce sont consistants avec l application de la regle du traitement equivalent par les pays qui se defendent

trade policy reform endogenous lobby group formation and environmental policy abstract this paper explores the effects of trade liberalization on environmental policy outcomes when collective action is endogenous the polluting industry s ability to undertake lobbying is shown to depend on the degree of competition in the product market establishing a new link between trade and environmental policies if trade liberalization causes industry collective action to become harder to sustain the stringency of the environmental policy is likely to rise these results highlight the role of trade liberalization on product market competition and its consequent impact on the incentive to lobby for less stringent environmental policies

do credible domestic institutions promote credible international agreements we examine the relationship between international policy coordination and domestic policy reputation when both are self sustaining we show that domestic policy commitment does not necessarily facilitate international cooperation rather efficient policies may be most easily sustained when governments are unable to pre commit to policy domestically moreover the lack of domestic commitment is more likely to facilitate international cooperation the larger the international spillovers of domestic policies are

regionalism in a multilateral world recent regional initiatives have been addressed from a vinerian perspective of trade creation and trade diversion this is true of both policy oriented economists who tend to be critical of the initiatives and theorists who have added dynamic and gametheoretic elements to the vinerian structure this paper describes the stylized facts of much recent regional integration and develops an alternative model the analysis suggests that regional integration far from threatening multilateral liberalism may in fact be a direct consequence of the success of past multilateralism and an added guarantee for its survival

erratum to multilateral trade negotiations bilateral opportunism and the rules of gatt wto abstract trade negotiations occur through time and between the governments of many countries an important issue is thus whether the value of concessions that a government wins in a current negotiation may be eroded in a future bilateral negotiation to which it is not party we identify rules of negotiation that serve to protect the welfare of governments that are not participating in the bilateral negotiation our main finding is that the two central principles of gatt wto nondiscrimination mfn and reciprocity preserve the welfare of nonparticipating governments and therefore offer a first line of defense against bilateral opportunism

tariffs and the most favored nation clause abstract in an n country oligopoly model of intraindustry trade n 3 this paper explores the economics of the most favored nation mfn principle under the non cooperative tariff equilibrium each country imposes higher tariffs on low cost producers relative to high cost ones thereby causing socially harmful trade diversion mfn adoption by each country improves world welfare by eliminating this trade diversion under linear demand mfn adoption by the country with the average production cost is most desirable high cost countries refuse reciprocal mfn adoption with other countries and also lose even if others engage in reciprocal mfn adoption amongst themselves

a strategic and welfare theoretic analysis of free trade areas abstract we construct a three country model to determine how the formation of free trade areas ftas affects optimal tariffs and welfare we find that at constant rest of the world row tariffs the adoption of internal free trade induces union members to reduce their external tariffs below the kemp wan j int econom 6 1976 95 97 level and causes row s terms of trade to improve and its welfare to rise when row also behaves optimally its policy response to the formation of the fta is to raise tariffs generally fta members prefer to liberalize internal trade partially and find regional integration appealing only if their collective size is sufficiently large we also demonstrate how ftas may undermine the attainment of global free trade

general equilibrium tax incidence under imperfect competition a quantity setting supergame analysis the incidence of various taxes is analyzed in a model with competitive and oligopolistic sectors friedman s grim trigger strategies support collusion with firms producing output to maximize joint profits subject to the constraint that no firm desires to cheat the sustainable level of output depends on the capitalized value of future retaliation therefore tax induced changes in the net return to capital the discount rate affect the output mix through their impact on the sustainability of collusion this collusive pricing effect is isolated and analyzed one result is that a general factor tax on capital but not labor is shifted

free trade networks abstract the paper examines the formation of free trade agreements ftas as a network formation game we consider an n country model in which possibly asymmetric countries trade differentiated industrial commodities we show that if all countries are symmetric the complete fta network is pairwise stable and it is the unique stable network if industrial commodities are not highly substitutable we also compare ftas and customs unions cus as to which of these two regimes facilitates global trade liberalization noticing that unlike cus each signatory of an fta can have another fta without consent of other member countries

the negotiation of sustainable tariffs abstract the governments of two countries explicitly negotiate over a new pair of tariffs as soon as they reach agreement the countries put into effect the agreed upon pair of tariffs which must be self enforcing we investigate how the difference in the two governments patience affects the negotiation results provided that the common optimum tariff is the status quo tariff rate for each country we find that the country with the more patient government gains most from the negotiation if the time lag between a defection and punishment in the implementation phase is short the opposite is true if the response lag in the implementation phase is long

preferential trade agreements and multilateral tariff cooperation are preferential trade agreements ptas building or stumbling blocks for multilateral trade liberalization i address this question in an infinitely repeated tariff game between three countries engaged in intraindustry trade under oligopoly the central result is that when countries are symmetric a free trade agreement fta undermines multilateral tariff cooperation by adversely affecting the cooperation incentive of the nonmember whereas a customs union cu does so via its effect on the cooperation incentives of members however when countries are asymmetric with respect to either market size or cost there exist circumstances where ptas facilitate multilateral tariff cooperation

a theory of trade concessions abstract we present a model of tariff disputes and concessions consisting of an infinitely repeated game under bilateral incomplete information given potential agreements to be reached through unilateral or reciprocal concessions we find that an agreement involving reciprocal concessions is reached immediately if the discount factor is large and or the volume of trade is small otherwise prior beliefs about country type matter when both countries hold pessimistic priors immediate reciprocal concessions still occur very different prior beliefs lead to an immediate unilateral concession of the pessimistic country whereas optimistic priors coupled with low discount factors may generate delayed agreements 1997 elsevier science b v all rights reserved

when are nash equilibria independent of the distribution of agents characteristics author s bergstrom ted varian hal r abstract we present examples of nash equilibria that do not vary with the distribution of a parameter across agents and then offer a general theorem that characterizes this independence

do countries free ride on mfn abstract the most favored nation mfn clause has long been suspected of creating a free rider problem in multilateral trade negotiations to address this issue we model multilateral negotiations as a mechanism design problem with voluntary participation we show that an optimal mechanism induces only the largest exporters to participate in negotiations over any product thus providing a rationalization for the principal supplier rule we also show that through this channel equilibrium tariffs vary according to the herfindahl hirschman index of export shares higher concentration in a sector reduces free riding and thus causes a lower tariff estimation of our model using sector level tariff data for the u s provides strong support for this relationship

is there too much hype about index based agricultural insurance abstract individual crop insurance has been largely abandoned in developing countries and replaced by insurance pilots based on weather indices these pilot schemes have encountered low demand research suggests that better off farmers may already be insured via income diversification their assets and social networks and may achieve profit maximising portfolios without formal insurance contracts they would be interested in such contracts only if they reliably reduced their exposure to risk at lower costs than their self insurance mechanisms conversely poor farmers are not able to self insure adequately have to trade off returns for reduced risk and could therefore benefit from a well designed insurance but they are cash credit constrained and therefore cannot advance the money before sowing time to buy insurance that pays out only after the harvest index insurance therefore cannot be scaled up even if a few farmers purchase it governments still will need to run relief programmes for the un