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

political influence motives and the choice between tariffs and quotas abstract tariffs and quotas are not symmetric under a variety of circumstances this paper pursues the implications of one such circumstance domestic market power for the political choice of protectionist instrument in the context of a political support maximization model tariffs dominate quotas in the political model in the absence of revenue seeking motives in the presence of revenue seeking ambiguity arises but limits can be placed on the range of tariff or quota levels also some welfare implications emerge

determinants of bilateral trade protection in this paper determinants of bilateral protection levels are empirically identified when controlling for multilateral trade regulation and importing country specific factors strong empirical support is provided of that three bilateral factors are influencing the bilateral protection level specifically a country s protection level on goods from a trade partner is positively affected by the domestic import penetration of goods produced by the trade partner negatively influenced by the intra industry traded share of these imports and positively affected by the trade partner s protection level on domestic goods moreover very high explanatory values are provided in the cross section estimations indicating that these determinants policy regulations and importer specific factors jointly explain almost all of the variation in bilateral protection levels the results are general in the sense that estimations are performed for a large sample of bilateral trade relations including 22 trade partners that are highly differentiated in terms of country characteristics the overall results indicate that to the extent that policy makers can affect bilateral protection levels under multilateral trade regulation they act on political economy rather than economic goals

conflict cooperation and commerce the effect of international political interactions on bilateral trade flows the public choice approach to political economy is employed to gain insight into the connection between international politics and trade flows a model is constructed in which importers are assumed to be rational utility maximizers who seek to satisfy international security as well as economic welfare objectives this model of bilateral trade flows reflects contemporary theory in the field of international economics and it explicitly incorporates the general foreign policy orientation of importers among its determinants the model is tested in 16 annual crosssectional estimations 1960 75 for a complete network of 25 countries the findings show considerable support for the hypothesis that trade flows are significantly influenced by broad political relations of amity and enmity between nations the author concludes that nations adjust trade ties to satisfy security as well as economic welfare goals and that a formal political economy of trade should reflect this fact

the political economy of declining industries senescent industry collapse revisited many observers have noted a strong tendency for protection once it is instituted to persist over time this paper first shows that persistent protection arises whenever lobbying is an alternative to costly adjustment with endogenous protection the level of tariffs is an increasing function of past tariffs the more an industry lobbies the greater the current protection it receives and the less it adjusts and the less the industry adjusts the more effective it is as a lobby in the future when the costs of lobbying and adjustment are fully variable declining industries contract more slowly over time and never fully adjust however the paper shows that adding a fixed cost of lobby formation or maintenance is sufficient to generate an endogenous collapse of protection such as that predicted by cassing and hillman 1986 american economic review 76 516 523 in which an industry abruptly terminates its lobbying and loses its protection finally the paper examines the well documented bias against growing industries in the lobbying process

alternative models of spatial competition the concept of a spatial price equilibrium underlies most studies of spatial movement and competition however this concept is based upon a notion of perfectly competitive markets that is often unrealistic for many markets such as the markets for oil and coal and ignores the existence of local spatial monopolies this paper presents alternative economic models of spatial competition and shows how all of these models can be solved with essentially the same solution algorithm specifically after reformulating the classical spatial price equilibrium model and two extensions of takayama and judge s monopoly model we state and analyze a cournot nash model and discuss solution algorithms we then generalize these models and algorithms to multiple commodities and networks with transshipment nodes we conclude with a brief discussion of possible extensions of this class of models and associated algorithms

policy choice theory and evidence from commitment via international trade agreements abstract why do governments employ inefficient policies when more efficient ones are available for the same purpose we address this puzzle in the context of redistribution toward special interest groups sigs by focusing on a set of important policies tariffs and non tariff barriers ntbs in our policy choice model a government can gain by committing to constrain tariffs through international agreements even if this leads to the use of less efficient ntbs commitment has political value because it improves the bargaining position of a government that is weak relative to domestic sigs using detailed data we find support for several of the model s predictions including i tariff commitments in trade agreements increase the likelihood and restrictiveness of ntbs but not enough to offset the original tariff reductions ii tariff commitments are more likely to be adopted and more stringent when the government is weaker relative to a sig thus the results can explain the use of inefficient policies for redistribution and suggest that the bargaining motive is an important source of the political value of commitment in international agreements

endogenous probability of protection and firm behavior abstract this paper studies the strategic reactions of firms to protectionist policies that are enforced with endogenous probability this probability is a function of firms actions firms in the country that may adopt the protectionist measures try to increase the probability of sanctions while foreign firms try to reduce this probability a simple framework is used to derive general results for uncertain protection this framework is used to analyze the responses to specific protectionist policies such as antidumping legislation and restrictions on the import market share finally the paper studies the welfare implications of the model

exchange rates and industry demands for trade protection the recent confrontation between china and the united states over currency policy illustrates a broader phenomenon exchange rate misalignments tend to spill over into trade policy although previous studies have shown that aggregate protectionist activity is positively related to the level of the real effective exchange rate we explore this relationship at the industry level several industry specific characteristics determine the protectionist response to exchange rate changes including the degree of exchange rate pass through the level of import penetration and the share of imported intermediate inputs in total industry inputs we find that the marginal effect of currency appreciation on the number of industry level antidumping petitions is positive and significant only for industries with high pass through therefore exchange rates appear to induce demands for trade barriers only in industries where competitiveness is directly harmed by currency appreciation

is environmental policy a secondary trade barrier an empirical analysis should international trade agreements be extended to include negotiations over environmental policy the answer depends on whether countries distort levels of environmental regulations as a secondary means of providing protection to domestic industries our results suggest that they do previous studies of this relationship have treated the level of environmental regulation as exogenous and found a negligible correlation between environmental regulation and trade flows in contrast we find that when the level of environmental regulation is modelled as an endogenous variable its estimated effect on trade flows is significantly higher than previously reported jel classification fl f14 f18 est ce que la politique environnementale est une barriere commerciale secondaire une analyse empirique est ce que les accords commerciaux internationaux doivent etre etendus pour couvrir la politique environnementale la reponse depend du degre de distorsion que les pays introduisent dans leur politique environnementale pour proteger leurs industries nationales nos resultats suggerent que cet impact est important des etudes anterieures de cette relation ont traite la politique environnementale comme exogene et ont montre qu il existe une co relation negligeable entre politique envir onnementale et flux commerciaux au contraire nous revelons que quand la politique environnementale est consideree comme variable endoge ne son effet sur les flux com merciaux est plus eleve de maniere significative que ce qu on a note anterieurement

anti dumping measures as a tool of protectionism a mechanism design approach in this paper we explore the design of optimal incentive compatible anti dumping ad measures when the weight given to the domestic firm s profit in the government s objective function is relatively small it is shown that no ad duty should be imposed if the foreign firm reports its own costs but a constant ad duty should be imposed if the domestic firm reports the foreign firm s cost when this weight is large in either case of reporting the ad duty is a prohibitive tariff the optimal ad measures are modified in the presence of a gatt wto constraint jel classification f12 f13 les mesures anti dumping en tant qu outil de protectionnisme une approche en termes de construction de mecanismes ce memoire examine la construction de mesures optimaales anti dumping ad quandla valence des profits de la firme domestique est faible dans la fonction objective du gouvernement on peut montrer qu aucune mesure ad ne devrait etre imposee si l entreprise etrangere revele ses propres couts mais qu un droit ad constant devrait etre impose si c est la firme domestique qui revele les couts de l entreprise etrangere quand la valence des profits de la firme domestique est grande quelle que soit la source de l information la mesure ad qui s impose est un droit de douane prohibitif les mesures optimales doivent evidemment etre modifiees pour prendre en compte la contrainte engendree par l existence des regles du gatt omc

on the incidence of us tariffs this paper provides evidence on the incidence of tariffs on products of export interest to developing countries by investigating the relationship between per capita incomes of us trading partners and tariff rates it constitutes the first attempt to assess the incidence of tariffs imposed by the us on countries that span the entire range of per capita incomes average tariff rates are lower for the poorest and richest countries and higher for countries in the middle of the income distribution this finding is not consistent with the widely held view that tariffs used by industrial nations bear more heavily on products of export interest to poorer developing countries than on imports from industrial nations it is consistent with the tariff escalation pattern reported in earlier studies if advanced countries account for most products at the high end of the fabrication scale results show that poorest countries will find it difficult to escape tariffs by attaining higher levels of economic development

optimal public sector wages i build a dynamic stochastic general equilibrium model with search and matching frictions to determine the optimal public sector wage policy public sector wages are crucial in achieving efficient allocation of jobs high wages induce too many unemployed to queue for public sector jobs in turn raising unemployment the optimal wage depends on the frictions in the two sectors following technology shocks public sector wages should be pro cyclical and deviations from the optimal policy significantly increase the volatility of unemployment

spatial market policy modeling with goal targets in this paper we show how the theory of variational inequalities can be applied to the formulation qualitative analysis and computation of a new competitive spatial market model in the presence of goal targets the model allows the decision maker to impose supply goals at production locations demand goals at consumption locations and transportation goals between supply and demand locations along with associated penalties for failure to comply this work may be viewed as a contribution to the growing literature on the development of mathematical methodologies for policy modeling

false friends empirical evidence on trade policy substitution in regional trade agreements in this paper we examine the interplay of regional economic integration and the use of bilateral antidumping ad measures our empirical analysis brings three central findings to light i we find that regional trade agreements rtas generally reduce the likelihood of ad activity among integration partners ii in addition an improvement in the tariff treatment between trading partners regardless of whether expressed as the directly faced tariff or as a tariff margin generally leads to a lower likelihood of bilateral ad and iii regarding the interaction of both events however a reciprocally higher tariff margin between integration partners leads to a higher likelihood of bilateral ad than an equal tariff margin among non integration trading partners the latter effect seems to be primarily driven by those rtas with a participation of south countries

on the stability of an adjustment process for spatial price equilibrium modeled as a projected dynamical system abstract this paper presents a stability study for the continuous time adjustment process proposed for the perfectly competitive spatial price equilibrium problem modeled as a projected dynamical system by nagurney takayama and zhang 1995 two distinct approaches are adopted here for establishing the stability of the spatial price equilibrium under such an adjustment process one approach utilizes the monotonicity condition on the supply prices demand prices and transaction costs to develop various stability properties the other utilizes the regularity concept adapted from zhang and nagurney 1995 which enables us to explore the stability of the adjustment process a nonstandard dynamical system via its minimal face flow a standard dynamical system

incremental protection and efficient political choice between tariffs and quotas this paper offers a new political economy explanation for the increasing use in recent years of quotas instead of or in combination with tariffs as a form of trade protection we show that under domestic monopoly the comparative efficiency of tariffs and quotas in achieving political objectives will vary depending on the nature of the mark et and the level of protection at high levels of protection quotas can become more politically efficient than tariffs we also show that at low levels of protection a price equivalent quota may not exist

non equivalent pass through of anti dumping duties countervailing duties and import tariffs we directly compare the short run pass through of tariffs anti dumping ad duties and countervailing cv duties into us import prices consistent with the theoretical predictions we find clear pattern of non equivalence in import price reaction to the three duty types with the most notable difference detected between ad duties and tariffs according to our estimates a tariff rate would have to be approximately two times higher than an ad duty rate in order to have the same effect on the delivered import price

the public private sector gender wage differential in britain evidence from matched employee workplace data this article shows that little of the gender earnings gap in the public and private sectors in britain are explained by differences in employee characteristics the differences in workplace characteristics however make a significant sizeable contribution it is shown that performance related pay and company pension schemes are associated with higher relative earnings in the private sector whilst increased provision of family friendly employment practices in the public sector is associated with higher relative earnings for women

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

a network equilibrium framework for internet advertising models qualitative analysis and algorithms in this paper we develop a network equilibrium framework for the modeling and analysis of competitive firms engaged in internet advertising among multiple websites the model allows for the determination of both the equilibrium online advertising budget as well as the advertising expenditures on the different websites we then specialize the model to the case of fixed online budgets for the firms the governing equilibrium conditions of both models are shown to satisfy finite dimensional variational inequalities we present qualitative properties of the solution patterns as well as computational procedures that exploit the underlying abstract network structure of these problems the models and algorithms are illustrated with numerical examples this paper adds to the growing literature of the application of network based techniques derived from operations research to the advertising marketing arena

games with strategic complementarities new applications to industrial organization this paper provides an introduction to the analysis of games with strategic complementarities and applications to industrial organization oligopoly pricing comparative statics and a taxonomy of strategic behavior in two stage games

u s corporate interests and the political economy of trade policy this paper examines the behavior of american corporations with respect to international trade policy initiatives during the 1970s using survey generated data on revealed corporate trade policy interests and firmand industry level data on company characteristics direct or proxy variables were developed and applied in linear regression equations using an ordered probit specification and in an alternative approach using factor analysis to construct a composite dependent variable hypothesized relationships were verified between corporate positions on trade liberalization and the intensity of competition from imports the benefits from improved access to foreign markets and internal risk pooling capabilities of firms firms exposed to the international competitive environment inevitably have a stake in national trade policy this paper explores the revealed behavior of u s corporations on matters of trade policy in the 1970s it develops a set of hypotheses linking corporate trade policy positions to a series of company and industry attributes these hypotheses are tested using survey generated information regarding corporate behavior on trade policy matters beginning with the protectionist burke hartke initiatives of the early 1970s through the post tokyo round period at the end of the decade studies of the political economy of protection typically begin with the proposition that import barriers create rents that can be appropriated by the protected industry the size of the rents to be obtained and their probable division among the various participants in the industry partly determine the intensity of protection seeking behavior lobbying undertaken by participants in the industry brock and magee 1978 the intensity is also influenced by the degree of success expected in the political arena and by imperfections in the lobbying process for instance the incentive to be a free rider on the lobbying efforts of others walter and jones 1981 the actual outcome of protection seeking activity is conditioned by a variety of political considerations as well for instance politicians may be constrained by the possibility of repercussions from groups adversely affected by protection including consumers and export oriented industries foreign competitors are also affected so that issues concerning foreign relations enter into the decision process in addition politicians may be influenced more generally by ideology party platforms or attitudes toward equity a number of researchers including ball 1967 fieleke 1976 clark 1980 and ray 1981a 1981b have verified that a significant positive correlation exists between nominal tariff rates or effective rates of protection across manufacturing industries and low skilled labor intensity taken to be an indicator of the intensity of import competition and thus related to the size of the rents that could be obtained by protection cheh 1974 and bale 1977 analyzed the determinants of the percentage reductions in rates of duty resulting from the kennedy round tariff cuts concluding that the cuts were determined in such a way as to minimize labor adjustment costs see also allen lewis and tower 1980 marvel and ray 1983 also explored the determinants of kennedy round tariff cuts finding the size of tariff cuts tended to be smaller if an industry was more concentrated or sold a larger fraction of its output to household consumers and larger if the industry was more intensive in research and development r d or more highly unionized the result for r d presumably represents the desire at the industry level for improved access to export markets achievable through larger reciprocal reductions in protection on the part of foreign countries along somewhat different lines baldwin 1976 analyzed several key congressional votes on the received for publication november 21 1983 revision accepted for publication december 14 1984 new york university the authors are grateful to robert lipsey robert j levenson j peter jarrett and james green for providing data that contributed to this study to jang ro lee ashok chatterjee and monica kaufmann for research assistance and to bill greene for providing advice on the estimation technique and computer program used to perform the statistical analysis thomas a pugel is also grateful for the support of an esmee fairbaim research fellowship at the university of reading 1 in both studies ray also explores nontariff barriers ntbs across u s manufacturing industries aside from finding a positive relationship between tariff rates and ntbs the results are not easily interpreted however there is some inferential evidence in walter 1971 which finds a significant positive relationship between ntb incidence and presumably relatively low skill intensive developing country exports

the political economy of the tariff cycle how can protectionism and free trade succeed one another our answer focuses on the changing balance of private actors political demands these actors acquire interests in tariff policies because their assets are spatially concentrated and trade in these assets is subject to various limitations actors in regions experiencing no new investment in an established industry old regions have interests that sometimes differ from those in regions where there is new investment we show that old regions have no reason to be involved in tariff politics at business cycle peaks during troughs whether a state becomes more or less protectionist depends ceteris paribus on the relative political strength of old import competing and old exporting interests if old import competing industries outweigh the old exporters then protection will tend to increase at the trough and decrease at the peak of a business cycle the opposite result occurs when old exporters are more influential

how much nominal rigidity is there in the us economy testing a new keynesian dsge model using indirect inference we evaluate the smets wouters new keynesian model of the us postwar period using indirect inference the bootstrap and a var representation of the data we find that the model is strongly rejected while an alternative new classical version of the model fares no better adding limited nominal rigidity to it produces a weighted model version closest to the data but on data from 1984 onwards the great moderation the best model version is one with a high degree of nominal rigidity close to new keynesian our results are robust to a variety of methodological and numerical issues

unprotective tariffs ineffective liberalization and other mysteries an investigation of the endogenous dimensions of trade policy formation in australia 1 introductionsince its formation as a federation in 1901 australia embraced a fairly comprehensive tariff schedule in relation to imported manufactures 1 tariff rates fluctuated considerably over the years however over the course of the century they remained sufficiently high to earn australian manufacturing the reputation of one of the most heavily protected manufacturing sectors in the industrialized world 2 in recent years a number of liberalization waves have surfaced the most notable of these took place in 1973 1977 1988 1991 and most recently in 1994 with the signing of the uruguay round of the gatt agreement still tariffs remain a principal actor in australia s menu of industrial policies in a recent edition of the annual report of the productivity commission 3 published in november 1999 it is noted that although tariffs have dropped considerably since 1994 they remain an important form of assistance tariff assistance still accounts for around 90 of measured effective assistance to the manufacturing sector 4 p 52 given the pervasiveness of australian tariff policy the significant welfare implications of changes in that policy and the particular importance of international trade for this country ensuing from its idiomorphic cultural resource endowment and geographic characteristics 5 considerable research effort has been invested in the examination of various dimensions of this issue at the forefront of pertinent empirical research two items have attracted considerable interest 1 the host of determinants of the highly dispersed tariff concessions and 2 the impact of liberalization on imports research that falls in the category that examines the former including anderson 1980 conybeare 1984 aislabie 1988 and feaver and wilson 1998 is consistent at varying degrees with the theory of endogenous trade policy formation 6 according to the foundations of this theory tariff concessions may be viewed as public outcomes that facilitate a political equilibrium the mechanics are rather elementary when the profit loss that arises from import competition exceeds the transaction cost of a successful lobbying campaign for protection private interests will undertake such lobbying activities the higher the loss from foreign competition the more fervent the lobbying effort hence an increase in import penetration is likely to trigger greater protection7 trefler 1993 p 139 unlike this line of inquiry the critical causal relationship of interest to studies that fall in the category that investigates item 2 including simmons and smith 1994 relates to the effects of tariff changes on imports rather than the reverse the causal directions of the nature examined by studies that investigate issues 1 and 2 are of course not mutually exclusive higher import penetration increases tariffs and higher tariffs in turn decrease import penetration however despite the simultaneity of these variables studies of australia s trade policies associated with research lines 1 and 2 followed separate paths by only considering unidirectional causal relationships and yet these paths do converge the meeting point perplexing results on the one hand studies of endogenous protection such as anderson 1980 and aislabie 1988 have consistently failed to establish the expected result that an increase in import penetration will lead to higher tariffs on the other studies of trade liberalization often find that tariff reduction shave asurprisingly small effect on imports with a study by simmons and smith 1994 concluding that at least in relation to the examined industry removal of the tariff would have no effect on the level of imports p 57 it is important to note that analogous and equally puzzling findings pertaining to improbably smalle ffect so fliberalization on imports have been identified in the caseofothercountries suchastheunitedstates byanumberofauthors

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

domino dumping i competitive exporters when exporting firms face the prospect of voluntary export restraints they have an incentive to export more than with no prospect of a voluntary export restraint since greater exports lead to larger license allocations in the event of a voluntary export restraint export country governments incentives differ leading either to export tax or subsidy depending on the circumstances the prospect of one departure from free trade thus leads to another a domino effect antidumping enforcement will ordinarily not eliminate and ironically may increase dumping copyright 1992 by american economic association

eu anti dumping and tariff cuts trade policy substitution the world trading system in its current form aims at reducing multilateral trade barriers across the board indeed the last successfully concluded multilateral trade negotiations led to substantial tariff concessions on the part of most developed economies what however happened to other forms of import protection have substantial tariff concessions subsequently been replaced by the use of alternative forms of import protection in this paper we empirically investigate the relationship between negotiated external tariff cuts and the subsequent use of anti dumping actions by the eu evidence is found for larger uruguay round tariff cuts increasing the probability of subsequent anti dumping investigations

trade restrictions as facilitating practices abstract the effect of quantitative restrictions in oligopolistic markets is shown to depend on whether imports are substitutes or complements for domestic products in the former case they have profound effects even when set at free trade levels because they impede the ability of the foreign firm to compete in the domestic market thereby acting to facilitate collusion and raise prices and profits for this reason tariffs and quotas are fundamentally non equivalent with substitute goods when goods are complements a voluntary export restriction ver at the free trade level has no effect and tariffs and quotas are equivalent

wto tariff commitments and temporary protection complements or substitutes abstract there is a long held notion in the trade policy literature that traditional tariff instruments and temporary protection tp measures are substitutes despite this prediction there is only mixed empirical evidence for a link between tariff reductions and the usage pattern of antidumping safeguard and countervailing duties based on recent theoretical advances i argue in this paper that the relevant trade policy margin for implementing tp measures is instead tariff overhangs the difference between wto bound and applied tariffs lower tariff overhangs constrain countries to raise their mfn applied rates without legal repercussions independent of past tariff changes using detailed sectoral data for a sample of 30 wto member countries during the period 1996 2014 i find strong evidence for an inverse link between tariff overhangs and tp activity this result implies that tariff overhangs and tp measures are substitutes vindicating the importance of existing tariff commitments as a key determinant of alternative protection instruments

sensitivity analysis for the general spatial economic equilibrium problem we consider the general spatial economic equilibrium problem where the supplies and demands at each market for each commodity may depend on the price on this as well as other prices of other commodities at other markets and the transportation cost on each link for each commodity may depend on the flow on this as well as other flows of other commodities on other links in the network for this model we perform stability and sensitivity analysis assuming that the supply demand and transportation cost functions are monotone we first show that the multicommodity equilibrium price pattern depends continuously upon the market supply and demand functions and the multicommodity equilibrium shipment pattern depends continuously upon the transportation cost functions we then focus on the delicate question of predicting the direction of the change in the price and shipment pattern and the incurred supplies demands and transportation costs resulting from changes in the supply demand and transportation cost fu

union wage differentials in the public and private sectors a simultaneous equations specification the paper attempts to integrate new approaches to estimating union wage effects with the analysis of public private sector wage differentials estimates of the union differential in both public and private sectors allowing for the endogeneity of union status are presented the hypothesis that the recently measured rents to public sector employment primarily reflect the recent increase in unionization in that sector is examined and receives considerable empirical support there was evidence of positive selection into the union sector especially for private sector workers union status appears to be strongly influenced by the expected wage gain from joining the union sector

unemployment collective bargaining and the demand for protection there is a widespread consensus among nonacademic observers that labor unions with large numbers of unemployed members have been central actors in political coalitions demanding protectionist trade policies since the mid 1970s in advanced industrial societies yet trade unions and unemployment are hardly mentioned in most theories of the politics of international trade the purpose of this paper is to develop a theoretical framework for understanding the importance of unemployment as a determinant of protectionist demands that is consistent with optimizing behavior on the part of union members and firms models of labor negotiations derived from cooperative bargaining theory are used to illustrate why the material benefits of protection received by union members and their employers in protected industries increase when union members are unemployed even when workers are risk neutral and capital is immobile

nontariff barriers and trade liberalization i introduction it is common to recognize that tariffs have gradually been replaced by nontariff barriers ntbs some authors go even further and argue there is a law of constant protection an expression used by bhagwati 1988 mainly to dismiss the idea baldwin 1984 600 for instance writes not only have these measures become more visible as tariffs have declined significantly through successive multilateral trade negotiations but they have been used more extensively by governments to attain the protectionist goals formerly achieved with tariffs the purpose of this article is to set up a model in which the effect of trade liberalization on the use of quotas and antidumping laws can be investigated directly we analyze two types of bilateral trade liberalization tariff reductions and quota elimination we show that our model is consistent with a progression from the use of tariffs only to the use of quotas following tariff liberalization to the use of antidumping laws when quotas have been jointly tarrified second it is also consistent with a narrowing of the range of industries in which each of these instruments is used third the extent of bilateral tariff liberalization and the ensuing degree of replacement of tariffs by ntbs depend on the combination of two industry specific characteristics the government s preferences for domestic firm profits and the importance of international transport cost in the industry overall our results suggest that treaties that remove or reduce one type of distortion may lead to the use of other policies tha t are even worse but despite the use of ntbs overall trade is more liberal to show these results we use a standard two country model with two way trade where the policy maker s objective function is quasi concave this last characteristic is important to explain some of the results as it leads to strategic complementarity in the tariff game and to the possibility of interior solutions in the quota game our results appear to track three separate sets of empirical facts well first evidence shows that there is a clear emergence of quantitative restrictions in the 1960s in manufacturing sectors and in developed economies followed by an explosion in the use of antidumping constraints since the 1980s 1 the emergence of these two ntbs can be linked to preceding multilateral trade rounds and in particular to the completion of the kennedy round today the general agreement on tariffs and trade gatt 1990 10 notes that despite a recent decline in the number of anti dumping investigations initiated in the united states and the european communities anti dumping remains after tariffs the most frequently invoked trade policies in these countries antidumping measures are also spreading to developing countries nogues 1993 quantitative restrictions are meanwhile on the decline as signatories of the uruguay round agreement are now required to tariffy existing quotas and constrain their future use gatt 1990 documents specific import quotas import licensing restrictions and items subject to import prohibition that have been eliminated in recent years second the gradual replacement of trade tools has also been accompanied by a reduction of the number of sectors affected by ntbs whereas very few products were traded without levy before the various gait rounds renner 1971 finds that 7 of the four digit product classes were affected by quantitative restrictions in the united states and in the european communities in 1970 the number of antidumping cases in the european communities initiated and or ending up with a positive decision represents a fraction of this number see gait 1993b mainly concentrated on a very small number of sectors see messerlin and reed 1995 of course it is not because a smaller number of sectors are affected by ntbs that overall protection necessarily decreases however given the high rates of growth in world trade it seems likely that despite this substitution the overall level of protection has decreased over time

rules or politics an empirical analysis of itc anti dumping decisions this research analyzes the international trade commission s anti dumping decisions from 1980 to 1986 the results suggest that commissioners use criteria consistent with the instructions set forth in u s legislation the analysis also indicates that political variables help predict commissioner decisions petitions involving senate oversight committee members constituencies may be systematically favored in the process evidence of possible bias toward less developed country exports is presented as well the methodology also yields estimates of commissioner specific fixed effects

tariffs and quotas in world trade a unified variational inequality framework abstract in this paper we develop a unified variational inequality framework in the context of spatial price network equilibrium problems that captures world trade policies in the form of tariff rate quotas which are two tiered tariffs and that have been applied in practice to numerous commodities the spatial price network equilibrium model allows for multiple supply markets and multiple demand markets in different countries as well as multiple transportation routes the model is qualitatively analyzed and also related to models with trade policies such as ad valorem tariffs and strict quotas a case study on the dairy industry focusing on the united states and france is presented to illustrate the modeling and computational framework with impacts of stricter quotas higher over quota tariffs as well as additional transportation routes assessed the numerical examples reveal that although domestic producers can gain under tariff rate quotas consumers may experience higher prices given the relevance of tariffs to global trade in the world today and discussions concerning the impacts the framework constructed in this paper is especially timely

welfare costs of the u s antidumping and countervailing duty laws abstract the antidumping ad and countervailing duty cvd laws in the united states have become the most pervasive form of import relief sought by domestic producers this paper estimates the collective economic effect of the hundreds of active u s ad cvd orders using a computable general equilibrium model we estimate that the collective net economic welfare cost in 1993 of these orders to be 4 billion this welfare estimate is sensitive to various modeling assumptions which are explored in the paper with the implementation of the uruguay round agreements the ad cvd laws remain one of the costliest programs restraining u s trade

trade policy making in a model of legislative bargaining in democracies trade policy is the result of interactions among many agents with different agendas in accordance with this observation we construct a dynamic model of legislative trade policy making in the realm of distributive politics an economy consists of different sectors each of which is concentrated in one or more electoral districts each district is represented by a legislator in the congress legislative process is modeled as a multilateral sequential bargaining game a la baron and ferejohn 1989 some surprising results emerge bargaining can be welfare worsening for all participants legislators may vote for bills that make their constituents worse off identical industries will receive very different levels of tariff the results pose a challenge to empirical work since equilibrium trade policy is a function not only of economic fundamentals but also of political variables at the time of congressional negotiations some of them random realizations of mixed bargaining strategies

strategic interaction among nations negotiable and non negotiable trade barriers trade policy is modelled as a two stage game between governments governments choose a negotiable trade barrier in the first stage of the game which is co operative the level of this barrier is treated as a binding commitment in the second stage of the game where the non negotiable trade barrier is chosen non co operatively hence governments choose trade barriers during negotiations with a view to influencing the equilibrium of the non co operative game to follow this proves to be a convenient framework in which to analyse the idea that trade agreements contain loopholes which can be exploited by protectionist governments trade negotiations induce substitution toward less efficient instruments of protection but are nevertheless welfare improving as long as the negotiations are relevant i e the negotiable barrier is actually in use and the two instruments are not perfect substitutes

resolving the public sector wage premium puzzle by indirect inference this paper investigates the public sector wage premium pswp in the uk using a microfounded economic model and indirect inference ii to answer the question whether there is public sector wage p

firm participation in steel industry lobbying firm participation in steel industry lobbying i introduction what are the causes of recent protectionist pressure exerted by u s import competing firms studies by coughlin terza and khalifah 1989 feigenbaum and willett 1985 and takacs 1981 examine the empirical relationship between macroeconomic conditions and the aggregate frequency of escape clause petitions file by u s manufacturing firms although the results are mixed as to whether international macroeconomic performance influences the demand for protection the studies indicate that domestic macroeconomic conditions significantly influence the frequency of escape clause petitions 1 as important as these are to understanding the underlying sources of protectionist pressure they do not address another equally important aspect of protectionist pressure the determinants of a single industry s demand for protection the fact that most protectionist pressure results from actions taken by individual industries underscores the importance of understanding the determinants of industry pressure indeed most trade legislation is designed to respond to the problems of individuals sectors of the economy in this paper we empirically examine the microeconomic determinants of the protectionist pressure exerted by the u s steel industry in antidumping and countervailing duty cases from 1982 after the trigger price mechanism was abolished to 1986 the steel industry is a particularly attractive subject for empirical analysis since no other industry pushed more aggressively for protection during the 1980s in recognizing that the degree of pressure exerted by an industry is the aggregate result of decisions made by individual firms to contribute to a collective action the microeconomic approach offers two advantages over previous studies 2 first to explain industry pressure we model the decision of the representative firm taking into account the incentives that a firm faces in a collective setting for example we recognize that the benefits of antidumping and countervailing duties have characteristics of a public good so that individual firms may have an incentive to free ride a proposition supported by the empirical results second we specify microeconomic variables that reflect the economic conditions facing the representative firm in the steel industry rather than macroeconomic variables which may not accurately measure the economic performance of specific industries or the international pressures they face in contrast to previous studies which found a significant relationship between macroeconomic performance and aggregate pressure we do not find that the steel industry s economic performance influences the degree of industry pressure our second objective is to examine the policy implications of free riding by testing the relationship between the effectiveness of a coalition of firms and the degree of protection actually received if an effective coalition of firms can influence the policy outcome then antidumping and countervailing duties are more likely to be provided to segments of the steel industry that can minimize the free rider problem since these segments are not necessarily those that absorb the greatest injury u s trade policy may not be meeting its goal of providing greater relief to firms most injured by dumped or subsidized imports the results confirm the proposition that segments of the steel industry which are injured by dumped or subsidized imports and which can organize an effective coalition do in fact receive greater protection than those segments that are merely injured ii the representative firm s decision to contribute to a less than fair value action to obtain protection from alleged less than fair value lfv imports imports that are either dumped by foreign firms or subsidized by foreign governments firms representing a domestic industry must file a complaint of foreign dumping or export subsidization with the international trade administration ita which then determines the magniture of dumping or subsidization

the kennedy round evidence on the regulation of international trade in the united states the purpose of this paper is to analyze and provide empirical evidence regarding the regulation of international trade flows our goal is to provide an explanation of the changes in the interindustry pattern of trade restrictions which emerged from the kennedy round of tariff negotiations the principal conclusion of the analysis is that the pattern of protection which resulted from the kennedy round was shaped to minimize the domestic political disruption resulting from liberalization industries which faced significant import threats and whose characteristics enhanced their potential political influence were able to maintain tariff protection in the face of overall liberalization the potential impact of the agreed upon tariff reductions was partially undermined by the introduction of offsetting nontariff trade barriers ntbs in addition ntbs were introduced systematically in industries that were becom

the impact of special interests on preferential tariff concessions by the united states this paper provides empirical evidence on the rela tive impact of the generalized system of preferences gsp adopted in 1975 and the caribbean basin initiative cbi adopted in 1983 on the pattern of u s imports of manufac tured goods from the target areas at the four digit level in 1984 imports from brazil mexico south america the carib bean basin and from all eligible countries are each analyzed we provide evidence that existing preferential agreements have failed to offset the bias in u s protection against competitive exports from developing countries we also explain why one might have predicted such an outcome

jobs jobs jobs a new perspective on protectionism this paper analyzes the determinants of protectionism in a small open economy with search frictions in this environment jobs generate rents whose access depends on the level of trade protection by raising the domestic price of a good a government may attract more firms in a particular industry this raises the probability that workers will find jobs in this sector and in turn will benefit from the associated rents though simple this channel may help explainavarietyofstylizedfactsonthestructureoftradeprotectionandindividualtrade policy preferences jel f130 f160

environmental regulations transfers and trade theory and evidence abstract this paper develops a theory of compensation of producers for the costs associated with environmental regulations we show that the existence of transfers can give counter intuitive effects of environmental policy on both output and trade flows in particular the compensation obtained by producers neutralizes the effect of environmental policy on output and consequently on trade flows this may help explain why previous empirical research has found weak evidence that environmental regulations affect trade patterns the theory is tested using agricultural sector data the evidence supports the hypothesis that environmental regulations and transfers are positively correlated

domino dumping ii anti dumping abstract domino dumping anderson american economic review 1992 82 65 83 arises when exporting firms dump to obtain more export licenses in the future when there is a positive probability of a future ver anti dumping policy may then be in the public interest for the importing country via lowering the probability of a ver increased enforcement may perversely lead to a rise in dumping also it may increase the probability of a ver and may reduce the probability of free trade it is possible for the public interest to require some enforcement however it is normally in the public interest to permit some dumping

the political economy of non tariff measures over the last decades non tari measures ntms have seen an important upsurge how ever little research has focused on the political economy of non tariff protection and the existing studies are mainly based on a single country or a specific type of measures this paper seeks to fill the gap by empirically evaluating the determinants of ntms in several countries both developed and developing overall results show certain protectionist purposes behind the adoption of ntms this conclusion is reinforced for restrictive measures i e subject to trade concerns but does not hold for non restrictive measures suggesting the legitimate goal of several ntms furthermore transnational lobbying defined as the influence exerted by national business groups during the ministerial conferences the highest authority of the world trade organization wto increases the probability of adopting ntms in both developed and developing countries

a dynamic model of endogenous trade policy empirical evidence suggests that past levels of protection are significant determi nants of current levels of protection we investigate dynamic interactions among interest groups and resulting endogenous links between current and future trade policies we explore these intertemporal links in a small open economy in which lobbying and tariff policies are the outcome of a dynamic game among factor owners the model can generate cycles with prolonged periods of free trade and or prolonged periods of restricted trade i e persistent trade policies an interesting aspect of the environment is the role of lobbying as a partial

when and how should infant industries be protected abstract this paper develops and analyzes a welfare maximizing model of infant industry protection the domestic infant industry is competitive and experiences dynamic learning effects that are external to firms the competitive foreign industry is mature and produces a good that is an imperfect substitute for the domestic good a government planner can protect the infant industry using domestic production subsidies tariffs or quotas in order to maximize domestic welfare over time as protection is not always optimal although the domestic industry experiences a learning externality the paper shows how the decision to protect the industry should depend on the industry s learning potential the shape of the learning curve and the degree of substitutability between domestic and foreign goods assuming some reasonable restrictions on the flexibility over time of the policy instruments the paper subsequently compares the effectiveness of the different instruments given such restrictions the paper shows that quotas induce higher welfare levels than tariffs in some cases the dominance of the quota is so pronounced that it compensates for any amount of government revenue loss related to the administration of the quota including the case of a voluntary export restraint where no revenue is collected in similar cases the quota may even be preferred to a domestic production subsidy

industry rent seeking and the filing of unfair trade complaints abstract this paper adopts a rent seeking framework to explain the incidence of antidumping and countervailing duty complaints brought to the u s international trade commission and the department of commerce tobit analysis on all 3 digit sic industries is employed to examine the relationship between the frequency of unfair trade complaints and such factors as industry concentration unionization capital intensity and levels and or changes in employment price cost margins and import penetration large capital intensive industries particularly those facing employment losses and rising import shares are found to be most likely to file complaints protection of quasi rents accruing to capital and labor rather than protection of monopoly returns appears to be the primary impetus behind the filing of unfair trade complaints

divided government and u s trade policy theory and evidence if different parties control the u s congress and white house the united states may maintain higher import protection than otherwise this proposition follows from a distributive politics model in which congress can choose to delegate trade policymaking to the president when the congressional majority party faces a president of the other party the former has an incentive to delegate to but to constrain the president by requiring congressional approval of trade proposals by up or down vote this constraint forces the president to provide higher protection in order to assemble a congressional majority evidence confirms that 1 the institutional constraints placed on the president s trade policymaking authority are strengthened in times of divided government and loosened under unified government and 2 u s trade policy was significantly more protectionist under divided than under unified government during the period 1949 90

a theory of competition among pressure groups for political influence this paper presents a theory of competition among pressure groups for political influence political equilibrium depends on the efficiency of each group in producing pressure the effect of additional pressure on their influence the number of persons in different groups and the deadweight cost of taxes and subsidies an increase in deadweight costs discourages pressure by subsidized groups and encourages pressure by taxpayers this analysis unifies the view that governments correct market failures with the view that they favor the politically powerful both are produced by the competition for political favors

on the equivalence of tariffs and quotas under duopoly abstract the purpose of this paper is to use a conjectural variation approach to examine the equivalence of tariffs and quotas set so as to result in the same equilibrium quantity of imports we have demonstrated that whether tariffs and quotas are equivalent depends crucially upon the particular value of the conjectural variations specifically in the case of equal import tariffs and quotas the equivalence holds only in the cournot case otherwise the domestic price is lower or higher under quotas depending upon whether competition is less or more competitive than cournot

the political economy of the european customs classification customs classification is an important element in a country s trade policy how a good is classified can affect the rate of duty that applies the coverage of non tariff barriers and the formulation and application of rules of origin reclassifications can occur because of the introduction of a new product but also because of protectionist motives this paper is the first attempt at explaining these reclassifications focusing on the european union i examine whether the number of tariff lines in an industry result from the introduction of new products or from protectionist lobbying the analysis focuses on 90 manufacturing industries over 12 years results suggest that protectionist lobbying does play a role in explaining changes in the eu s customs classification

the determinants of exit in an open economy in this paper the determinants of exit are investigated for the manufacturing sector of the united states economy which has been subjected to growing international influences the analysis uses united states cross sectional data the results of the exit equation suggest that low profitability declining industry growth and displacement of incumbents by entrants foster exit international influences are also seen to have an impact on u s manufacturing exit specifically imports into an industry have a small effect on exit and protection has little influence in stemming exit

domestic content legislation house voting and the economic theory of regulation house voting on domestic content legislation provides a rare opportunity to examine the political economy of protectionism with respect to a particular issue rather than by using the traditional interindustry approach the results indicate that a representative s vote in favor of the content legislation and the intensity of the legislator s preferences are positively related to the importance of the auto and steel industries in the representative s district an increasing unemployment rate campaign contributions from labor groups affiliation with democratic party and a liberal ideology despite ideology s statistical significance the results suggest this variable can be disregarded because neither the predictive accuracy nor the explanatory power of the model is improved by its inclusion the estimates also provide insights concerning the impact of changes in the independent variables upon voting patterns

on convergence of the pies algorithm for computing equilibria equilibria in market models with continuous market supply functions can be obtained by computing fixed points with an activity analysis representation of production fixed point algorithms would converge slowly further since the market model here is of a partial equilibrium nature the market demand function may not exhibit the integratability condition precluding the formulation of the market equilibrium problem as an economic surplus maximization problem we examine an iterative algorithm the pies method for locating equilibria in markets whose production is described by optimization over a finite set of activities and whose econometric demand function does not possess the integrability property convergence properties of the algorithm along with existence and uniqueness of market equilibrium are summarized

tariff liberalisation and increased administrative protection is there a quid pro quo theoretical models and intuition suggest that the amount of non traditional protection such as anti dumping duties will increase as more traditional forms such as tariffs are lowered under multilateral trade agreements this paper is the first empirical study of the role of tariff liberalisation in the spread of anti dumping through both correlations and regression approaches we analyse the relationship between tariff concessions made during the uruguay round trade negotiations and the filing of anti dumping petitions with particular interest in whether multilateral trade reductions have spurred the recent growth in new users of anti dumping policies we find that at least for developing economies tariff reductions agreed to under the uruguay round not only increased the likelihood of a country using anti dumping protection but also the total number of anti dumping petitions filed by countries

lobbying and adjustment in declining industries abstract this paper explains the persistence of protection in terms of interaction between industry adjustment lobbying and the political response faced with a trade shock owners of industry specific factors can respond in two ways they can undertake costly adjustment or they can lobby politicians for trade protection and thereby mitigate the need for adjustment the choice will depend on the relative returns from adjusting relative to lobbying by introducing an explicit lobbying process it can be shown that the current level of protection is an increasing function of past protection and that declining industries contract more slowly over time the more responsive are politicians to lobbying in addition the model makes clear that the type of senescent industry collapse predicted by cassing and hillman 1986 is only possible under fairly special assumptions about the technology of lobbying

voluntary export restraints antidumping procedure and domestic politics a voluntary export restraint ver is preferred to a tariff by a government concerned about electoral returns when the influence of industry profits is large relative to the losses to consumers from higher prices if the foreign firm is uncertain of these pressures the antidumping code facilitates the complete transfer of the relevant information and generates a ver rather than a tariff in equilibrium the choice across instruments is determined by the political attributes domestic and foreign profits rise with the antidumping generated ver and the ver lowers the volume of trade by more than the expected duty copyright 1996 by american economic association

public policies pressure groups and dead weight costs abstract this paper presents a model of competition among special interest groups for political influence each active group exerts pressure to affect its taxes and subsidies where activities of different groups are related by the equality between total tax collections and total tax subsidies the dead weight costs and benefits of taxes and subsidies play a major role in our model an increase in the dead weight cost of taxation encourages pressure by taxpayers while an increase in the dead weight costs of subsidies discourages pressure by recipients various applications of the analysis are discussed