a dynamic theory of collective goods programs a collective goods program such as an entitlement program distributes benefits and costs according to constituents characteristics this paper presents a dynamic theory of the legislative choice of collective goods programs based on a sequential model of proposal making and voting in a majority rule legislature where the status quo in a session is given by the program last enacted a stationary markov perfect equilibrium is characterized for a unidimensional collective goods program and yields a generalized median voter theorem comparative statics on preferences and legislative procedures and a characterization of the dynamics of such programs equilibrium programs can expand or contract over time but they ultimately converge to the median on the path to that point legislators may act strategically to address the durability problem that a future legislature can undo the actions of the present legislature by strategically positioning the status quo to limit the changes that future legislatures can make

fully absorbing dynamic compromise abstract i consider a repeated divide the dollar voting model with rejections leading to the implementation of the previous period s allocation see kalandrakis 14 i show that if proposals can be non exhaustive then equal division can be achieved as an absorbing steady state from any initial allocation given a large enough discount factor as a part of a markov perfect equilibrium this result is robust to changes in voting thresholds and persistence in proposal power outside of unanimity or total persistence

the economics of investor protection isds versus national treatment abstract investor state dispute settlements isds are supposed to protect foreign investors against domestic policies causing unjustified harm this paper scrutinizes the effects of isds and national treatment provisions in a two period model where foreign investment is subject to a hold up problem it shows that isds may increase welfare but comes with additional regulatory distortions in the first period a national treatment provision avoids these regulatory distortions but implies entry distortions because it makes the hold up problem also apply to domestic firms if the domestic regulatory framework applies to many domestic firms a national treatment provision welfare dominates isds

legislated protection and the world trade organization tariff bindings and administered protection are two characteristics of the world trade organization wto that are little understood tariff bindings place a ceiling on tariffs that is not always reached whereas administered protection provides all industries with some minimum import protection effectively creating a floor for protection how do these policies affect applied most favored nation mfn tariff rates that are enacted through the legislature i model tariffs determined by a dynamic legislative process and show that low applied mfn tariffs are less likely with tariff bindings and more likely with administered protection than under purely legislated protection

self enforcing wage contracts we examine long term wage contracts between a risk neutral firm and a risk averse worker when both can costlessly renege and buy or sell labour at a random spot market wage a self enforcing contract is one in which neither party ever has an incentive to renege in the optimum self enforcing contract wages are sticky they are less variable than spot market wages and positively serially correlated they are updated by a simple rule around each spot wage is a time invariant interval and the contract wage changes each period by the smallest amount necessary to bring it into the current interval

the limits of political compromise debt ceilings and political turnover we study the desirability of limits on the public debt and of political turnover in an economy where incumbents have an incentive to set public expenditures above the socially optimal level due to rent seeking motives parties alternate in office and cannot commit to future policies but they can forge a political compromise where each party curbs excessive spending when in office if it expects future governments to do the same in contrast to the received literature we find that strict limits on government borrowing can exacerbate political economy distortions by making a political compromise unsustainable this tends to happen when political turnover is limited conversely a tight limit on the public debt fosters a compromise that yields the efficient outcome if political turnover is vigorous our analysis thus suggests that to sustain good economic policies a society needs to restrict either the extent of political turnover or the ability of governments to issue debt but not both

economies of scale and barriers to entry dixit has recently presented a model in which established firms select capacity to discourage entry but cannot employ threats they would not rationally execute after entry entry deterrence in a slight modification of this model involves the classical limit price output under linear or concave demand however the capital cost of a firm of minimum efficient scale is an upper bound on the present value of the monopoly profit stream that can be shielded from entry it is argued that this suggests the general unimportance of entry barriers erected by scale economies

network externalities discrete demand shifts and submarginal cost pricing the introduction of a new product often causes a massive discrete demand shift to the new product this study demonstrates that if a large scale demand shift to a new product is accompanied by network externalities it may result in submarginal cost pricing by which the seller sets its price below the marginal cost this finding casts new light on dumping and safeguard issues in the real world jel classification d42 externalites de reseaux deplacements discrets de la demande et tarification en deca du cout marginal l introduction d un nouveau produit engendre souvent un deplacement massif discret de la demande vers le nouveau produit cette etude montre que si un tel deplacement de la demande est accompagne d externalites de reseaux il peut s ensuivre une tarification en deca du cout marginal ou le vendeur fixe son prix en dessous du cout marginal ce resultat jette une lumiere nouvelle sur les problemes de dumping et de protection dans le monde reel

an economic model of representative democracy this paper develops an approach to the study of democratic policy making where politicians are selected by the people from those citizens who present themselves as candidates for public office the approach has a number of attractive features first it is a conceptualization of a pure form of representative democracy in which government is by as well as of the people second the model is analytically tractable being able to handle multidimensional issue and policy spaces very naturally third it provides a vehicle for answering normative questions about the performance of representative democracy

openness external risk and volatility implications for the compensation hypothesis a central assumption in the globalization literature is that economic openness generates economic insecurity and volatility based on this assumption schol ars of international political economy have proposed the compensation hypothesis which claims that globalization bolsters rather than undermines the welfare state by increasing public demand for social protection against externally generated eco nomic instability the openness volatility link is dubious however on both theoret ical and empirical grounds in this study i revisit the volatility assumption focusing on a crucial difference between openness and external risk in their effect on volatil ity my statistical analysis of a panel data set from 175 countries 1950 2002 finds a consistent effect of external risk on volatility of the major economic aggregates but a largely insignificant effect of openness these findings suggest that economic volatility may be a mistaken link in explaining the openness spending nexus calling for further research on the causal mechanisms linking the two the general growth of government in the post world war ii era is one of the most important empirical regularities in political science measured by general govern ment consumption or sectoral expenditures government size grew dramatically during most of the postwar period intrigued by this phenomenal government growth political scientists offered numerous accounts some viewing this growth as a corollary of economic phenomena such as modernization industrialization income distribution or fiscal illusion and others attributing government growth to political causes such as bureaucratization interest group politics and electoral competition 1

electoral uncertainty fiscal policy and macroeconomic fluctuations abstract in this paper we study the link between elections fiscal policy and aggregate fluctuations the setup is a stylized dynamic stochastic general equilibrium model incorporating both technology and political re election shocks the latter are incorporated via a two party model with elections the main theoretical prediction is that forward looking incumbents with uncertain prospects of re election find it optimal to follow relatively shortsighted fiscal policies and that this hurts capital accumulation our econometric estimation using u s data finds a statistically significant link between electoral uncertainty and policy instruments and in turn macroeconomic outcomes

the egyptian farm labor market revisited abstract egyptian evidence loomed large in the old debate between proponents of surplus labor and their neo classical critics the paper uses the recent experience of this labor market to revisit the issues the unprecedented changes engendered by the oil boom basically confirm the neo classical view one may discern the following stylized facts of the egyptian farm labor market 1 both supply and demand for labor are inelastic with respect to the wage 2 real wages are very flexible rising and then falling sharply with international oil prices 3 supply shifts explain these real wage changes 4 these are in turn primarily the outcome of international labor migration 5 regional wage disparities remained roughly constant during the past decade the conclusion draws some implications for poverty alleviation and for the political economy question of how the benefits of the regional oil boom were shared

political reputations and campaign promises we analyze conditions under which candidates reputations may affect voters beliefs over what policy will be implemented by the winning candidate of an election we develop a model of repeated elections with complete information in which candidates are purely ideological we analyze an equilibrium in which voters strategies involve a credible threat to punish candidates who renege on their campaign promises and in which all campaign promises are believed by voters and honored by candidates we characterize the maximal credible campaign promises and find that the degree to which promises are credible in equilibrium is an increasing function of the value of a candidate s reputation jel d8

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

dynamic bargaining and stability with veto players this note examines the structure of stationary bargaining equilibria in the finite framework of anesi 2010 the main result establishes a tight connection between the set of equilibrium absorbing points and the von neumann morgestern solutions assuming that players are patient that the voting rule is oligarchical and that there is at least one veto player with positive recognition probability a set of alternatives corresponds to the absorbing points of an equilibrium if and only if it is a von neumann morgenstern solution we also apply our analysis of ergodic properties of equilibria to the persistent agenda setter environment of diermeier and fong 2012 we show that all equilibria are essentially pure and we extend their characterization of absorbing sets to allow an arbitrary voting rule and by removing the restriction to pure strategy equilibira

bargaining in standing committees with an endogenous default committee voting has mostly been investigated from the perspective of the standard baron ferejohn model of bargaining over the division of a pie in which bargaining ends as soon as the committee reaches an agreement in standing committees however existing agreements can be amended this article studies an extension of the baron ferejohn framework to a model with an evolving default that reflects this important feature of policymaking in standing committees in each of an infinite number of periods the ongoing default can be amended to a new policy which is in turn the default for the next period the model provides a number of quite different predictions i from a positive perspective the key distinction turns on whether the quota is less than unanimity in that case patient enough players waste substantial shares of the pie each period and the size principle fails in some pure strategy markov perfect equilibria in contrast the unique markov perfect equilibrium payoffs in a unanimity committee coincide with those in the corresponding baron ferejohn framework ii if players have heterogeneous discount factors then a large class of subgame perfect equilibria including all markov perfect equilibria are inefficient

inside the hybrid iron cage political origins of hybridization this paper examines how social movement type political interactions between conflicting parties within an organization influence the adoption of a hybrid practice we argue that a hybrid practice is likely to be adopted when power balance between challengers and incumbents is achieved to shed light on conditions for organizational settlement based on such power balance we focus on three factors structures actors and processes of social movement type political interactions within organizations by studying changes in the presidential selection systems of korean universities between 1988 and 2006 this paper illustrates how organizational settlement resulted in the adoption of a hybrid system by combining elements of two previous competing presidential selection systems appointment and direct voting systems the general implications for the understanding of hybridization organizational settlement and organizational heterogeneity are discussed

dynamic legislative policy making abstract we prove existence of stationary markov perfect equilibria in an infinite horizon model of legislative policy making in which the policy outcome in one period determines the status quo for the next we allow for a multidimensional policy space and arbitrary smooth stage utilities and we assume preferences and the status quo are subject to arbitrarily small shocks we prove that equilibrium continuation values are differentiable and that proposal strategies are continuous almost everywhere we establish upper hemicontinuity of the equilibrium correspondence and we provide weak conditions under which each equilibrium of our model determines an aperiodic transition probability over policies we establish a convergence theorem giving conditions under which the invariant distributions generated by stationary equilibria must be close to the core in a canonical spatial model finally we extend the analysis to sequential move stochastic games and to a version of the model in which the proposer and voting rule are determined by play of a finite perfect information game

informal insurance arrangements with limited commitment theory and evidence from village economies recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income thus rejecting the hypothesis of full risk pooling we attempt to explain these observations by adding limited commitment as an impediment to risk pooling we provide a general dynamic model and completely characterise efficient informal insurance arrangements constrained by limited commitment and test the model using data from three indian villages we find that the model can fully explain the dynamic response of consumption to income but that it fails to explain the distribution of consumption across households

entry deterrence with uncertain entry and uncertain observability of commitment the standard approach to the issue of strategic entry deterrence is based on the assumption that if the incumbent does not precommit entry will take place with certainty while if he does precommit entry will be deterred with certainty in this note we allow for the possibility that the opportunity cost of entry is random so that entry is not a priori certain we also allow for the possibility that the incumbent s commitment is not observed by the potential entrant we show in numerical examples that even very little uncertainty may be sufficient to induce the incumbent not to attempt to deter entry

money burning and multiple equilibria in bargaining abstract this paper synthesizes recent work on delay and multiple equilibria in complete information rubinstein bargaining we identify a general principle money burning underlying prior results and develop a general model of the phenomena money burning is a threat by one player to destroy surplus which can serve to enhance that player s bargaining power if it is credible our results show that the uniqueness and efficiency properties of the subgame perfect equilibrium of rubinstein bargaining are vulnerable to players ability to burn money journal of economic literature classification number 026

anti dumping what are the numbers to discuss at doha while tariff barriers have decreased worldwide through various gatt rounds anti dumping has surged to play a crucial role as the most important non tariff barrier after much debate and opposition anti dumping is on the agenda of the doha round of multilateral trade negotiations and it is one of the most important issues especially for developing countries as they are the main targets of this policy instrument with this prospect it is important to assess the relevance of anti dumping not only by focusing on traditional users but by analysing the experience of new users which are now major players in the field this paper improves upon existing studies by providing a comprehensive assessment on the use of anti dumping first data on the time pattern of worldwide implementations of anti dumping laws are presented this time profile shows interesting relationships with legal developments in gatt and wto dispositions second usual sources of data are complemented with various other sources this allows the inclusion of recent heavy users like china russia taiwan and ukraine which are ignored in similar studies but important for their trade volumes this enlarged and updated dataset shows that new users are even more important than previously thought with implications for the doha negotiations

ec trade protection law produmping or antidumping this paper argues that the anticipation of protection can have astimulating effect on exports instead of the commonly claimed effect of harassment if protection serves market cartelization by fixing export quantities or prices exporters may have an incentive to increase their sales abroad in order to secure a large share of the expected rent which is brought about by the anticipated import restriction this may even result in sales below marginal costs or dumping the effect of the protectionist threat may then be the reverse of what is intended it can raise the speed of import penetration and it can provoke dumping a formal model and a supportive institutional analysis of ec trade protection is supplemented by preliminary empirical evidence

impossibility of collusion under imperfect monitoring with flexible production we show that it is impossible to achieve collusion in a duopoly when 1 goods are homogenous and firms compete in quantities 2 new imperfect information arrives continuously without sudden events and 3 firms are able to respond to this new information quickly the result holds even if we allow for asymmetric equilibria or monetary transfers the intuition is that the flexibility to respond to new information quickly unravels any collusive scheme and that signals about the aggregate behavior only cannot be used effectively to provide individual incentives via transfers our result applies both to a simple stationary model and a more complicated one with prices following a mean reverting markov process

credibility and policy convergence in a two party system with rational voters the traditional approach to modeling political parties behavior based upon the contribution of anthony downs 1957 assumes that the parties unique objective is to win elections thus they maximize their popularity the crucial implication of this assumption for a two party system is that if the two parties have the same information about voters preferences full convergence of policies results from electoral competition this is the crucial implication of the median voter theorem more generally it may be argued that different parties are motivated differently because they represent different constituencies parties may not care only about winning elections per se but also about the quality of the policies resulting from an election in this case the candidates of the two parties view winning an election not only as a goal per se but also as a means of implementing a better policy for their respective constituencies this paper shows that electoral competitions imply dynamic inconsistency if the voters are modeled as rational and forwardlooking agents and parties do not care exclusively about being elected but also about which policy to implement once elected the dynamic inconsistency arises as follows the parties have an incentive to announce convergent platforms to increase their chances of election however if the elected party is not committed to its electoral platform it has an incentive to follow its most preferred policy rather than the policy announced in its platform if voters are rational they account for this incentive thus in general in a one shot electoral game the only timeconsistent equilibrium is one in which no convergence is possible the two parties follow their most preferred policies and the voters rationally expect this outcome full convergence of parties platforms results only as a limiting case when the parties are completely indifferent with respect to the quality of the policies resulting from the election thus these results differ from the existing literature on ideologically motivated politicians for instance donald wittman 1977 1983 randall calvert 1985 which implicitly assumes the possibility of binding commitments to electoral platforms complete or partial policy convergence can be the outcome of political competition if the interaction between the parties and the voters is modeled as an infinitely repeated game in fact if the candidates have concave objective functions the welfare maximizing policy rule implies a complete convergence of parties policies however this cooperative and agreed upon policy may or may not be sustainable as a subgame perfect equilibrium depending on parameter values in particular it depends on the discount rates of the two parties the degree of polarization of their preferences and the relative popu graduate school of industrial administration carnegie mellon university pittsburgh pa 15213 and national bureau of economic research cambridge ma 02138 this paper is based upon a chapter of my unpublished doctoral dissertation at harvard university i am greatly indebted to jeffrey sachs for directing my attention toward these issues and for many conversations i also wish to thank andrew abel dilip abreu olivier blanchard ramon caminal andrew caplin alex cukierman morris fiorina benjamin friedman herschel grossman howard rosenthal and the referees for very useful comments the responsibilitv af anv n mtnkieis af calrirp nfnlv mine the result of policy convergence in a two party system is more general than the median voter theorem for discussions of convergence results not at the median see john ledyard 1984 peter coughlin 1984 coughlin and shmuel nitzan 1981 melvin hinich 1977 for earlier work on spatial competition see richard mckelvey 1975 hinich ledyard and peter ordeshook 1972 1973 and the references quoted therein the present paper focuses on the result of convergence rather than on the median voter theorem per se

the continued dumping and subsidy offset act an economic analysis under the continued dumping and subsidy offset act cdsoa of 2000 the u s government distributes the revenue from anti dumping and countervailing duties to domestic firms alleging harm in this article we develop a simple model to examine the economic effect of the cdsoa for the case in which the offset payments to domestic firms are linked to the volume of foreign imports the cdsoa may increase foreign imports when the domestic market is more competitive than in the cournot equilibrium this finding runs contrary to what the e u and some exporting countries have claimed but if the market is less competitive than in cournot the cdsoa becomes an instrument of trade protectionism

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

anticipatory effects of voluntary export restraints a study of home video cassette recorders market 1978 86 abstract this paper investigates the impact of voluntary export restraints vers at the pre implementation stage when exporters have a good prospect for the vers distinctive features of the vcr market in 1978 86 provide a testable hypothesis to analyze the effect of the ec japan vers which were implemented in the fiscal years of 1983 85 the paper finds consistent evidence that the vers affected firms pricing behavior in the u s market prior to the ver period as a result of japanese exporters anticipation of the vers

dynamic collective choice with endogenous status quo we analyze a bargaining situation in which preferences evolve over time and the previous agreement becomes the next status quo the endogeneity of the status quo exacerbates the players conflict of interest players disagree more often than under exogenous status quo this leads to inefficiencies and status quo inertia under certain conditions the negotiations can come to a complete gridlock players never reach an agreement gridlock can occur between players with arbitrarily similar preferences provided they are sufficiently patient in legislative settings our model predicts polarization and explains why legislators may fail to react promptly to economic shocks

antidumping law as a collusive device in the united states many antidumping petitions are withdrawn before the investigations are completed prusa 1992 argues that petitions are used by domestic industries to induce foreign industries into collusive agreements in his model all antidumping petitions should be withdrawn which is not the case this paper provides a model in which only some petitions are withdrawn withdrawal depends on two key parameters coordination cost and bargaining power of domestic and foreign industries a new data set is constructed to test the model on the u s experience for the period 1980 97 the econometric analysis supports the theoretical conclusions of the model

democracy as an equilibrium observation shows that while democracy is fragile in poor countries it is impregnable in developed ones to explain this pattern i develop a model in which political parties propose redistributions of incomes observe the result of an election and decide whether to comply with the outcome or to launch a struggle for dictatorship democracy prevails in developed societies because too much is at stake in turning against it more income can be redistributed in developed than in poor countries without threatening democracy limits on redistribution arise endogenously so that constitutions are not necessary for democracy to endure a democratic culture characterizes the equilibrium

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

has the byrd amendment affected us imports the continued dumping and subsidy offset act cdsoa also known as the byrd amendment allows the u s government to distribute revenues from antidumping duties to domestic firms alleging harm prior to the amendment these revenues were not distributed to firms in this article we formally test the hypothesis that the byrd amendment effectively provides double protection to u s firms to the extent that it further restricts u s imports as argued by the e u and eleven other u s trading partners using a rich panel of 362 u s manufacturing industries for the period 1998 to 2003 we find that whether or not the byrd amendment restricted u s imports depends crucially on the level of competitiveness in the import competing industry specifically we find that the byrd amendment served to restrict imports only in industries where competition is relatively weak while the amendment is associated with an increase in imports in more competitive industries

durable coalitions and communication public versus private negotiations abstract we present a laboratory experiment to study the effect of communication on durable coalitions coalitions that support the same allocation from one period to the next we study a bargaining setting where the status quo policy is determined by the policy implemented in the previous period our main experimental treatment is the opportunity for subjects to negotiate with one another through unrestricted cheap talk communication before a proposal is made and comes to a vote we compare committees with no communication committees where communication is public and messages are observed by all committee members and committees where communication is private and any committee member can send a private message to any other committee member we find that the opportunity to communicate has a significant impact on outcomes and coalitions when communication is public there are more universal coalitions and fewer majoritarian coalitions with private communication there are more majoritarian coalitions and fewer universal coalitions with either type of communication coalitions occur more frequently and last longer than with no communication the volume and content of communication is correlated with coalition type these findings suggest a coordination role for communication that varies with the mode of communication

vers and expectations extensions and evidence this paper analyses the effects of an expected future voluntary export restraint on the level of firms current exports to a market the traditional result that current exports increase is shown to depend on the degree of collusion in the exporting industry and the anticipated restrictiveness of the ver the former relationship is tested by reference to the effect of ec import surveillance on its imports surveillance is argued to indicate an increased probability of a ver in the future and it is found that while competitive industries respond to it by increasing exports to the ec less competitive ones curtail exports this constitutes one of the few empirical tests of the strategic part of strategic trade policy

strategic entry deterrence in analyzing deterrence of large scale entry two classes of entry barriers may be distinguished an innocent entry barrier is unintentionally erected as a side effect of innocent profit maximization in contrast a strategic entry barrier is purposely erected to reduce the possibility of entry two types of innocent barriers may also be distinguished a postentry absolute advantage has the property that if entry did occur the established firm would be at a profit advantage over the entrant examples are superior technology or product design patents and lower input prices a preentry asymmetry advantage arises from the fundamental preentry asymmetry between established firm and potential entrant before the entrant makes his entry decision the established firm has already committed resources this prior existence gives first move advantages the preentry asymmetry is independent of symmetry or asymmetry in the rules the equilibrium concept of the postentry game that might ensue even if the postentry game will be played according to nash cournot or entrant as leader rules the preentry leadership

dynamic pivotal politics we analyze a dynamic extension of a parsimonious model of lawmaking in which preferences evolve over time and today s policy becomes tomorrow s status quo unlike in existing models of pivotal politics policy makers voting behavior depends on the institutional environment and on their expectations about future economic and political shocks relative to sincere voting the equilibrium behavior exhibits a strategic polarization effect which increases with the degree of consensus required by the institution the volatility of the policy environment and the expected ideological polarization of the future policy makers the equilibrium behavior also exhibits a strategic policy bias which works against any exogenous policy bias embedded in the voting rule our analysis implies that the existing literature underestimates the inertial effect of checks and balances and overestimates the impact of institutional biases such as fiscally conservative budget procedures

a three player dynamic majoritarian bargaining game this file contains two sets of calculations first we report the calculations of demands and continuation values of proposition 1 second the mixing probabilities of proposition 1 are shown to be well defined

trade diversion from tomato suspension agreements trade barriers can cause output to be diverted to other countries and into other products we study the effect of a voluntary price restraint vpr on mexican tomatoes entering the united states the diversion caused by the vpr is statistically and economically significant representing over four fifths of the direct effects of the trade barrier when the vpr was binding mexico exported more tomatoes to canada the united states cut back on exports while canada increased their exports to the united states the vpr also diverted fresh tomatoes in mexico into paste production which was then exported to the united states des barrieres commerciales peuvent entrainer la diversion de l output vers d autres pays ou d autres productions on etudie la diversion causee par les accords de restriction volontaire des prix arvp des tomates mexicaines entrant sur le marche americain la diversion causee par les arvp a ete statistiquement et economiquement significative representant plus des quatre cinquiemes des effets directs de la barriere tarifaire quand les arvp ont ete contraignants le mexique a exporte plus de tomates au canada les etats unis ont reduit leurs exportations alors que le canada augmentait ses exportations vers les etats unis les arvp ont aussi entraine une diversion des tomates fraiches au mexique vers la production de puree de tomate un produit qui a alors ete exporte vers les etats unis

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

public spending and the paradox of supermajority rule this article examines the paradox that a supermajority rule in a legislature promotes excessive government spending we propose a simple conjecture if rent seeking coalitions dominate legislative politics and if individual legislators demands for rent seeking activities are price inelastic a change of legislative rules from simple majority to a supermajority will lead to greater public spending other things equal using data from u s state legislatures 1970 to 2007 we find that the adoption of a supermajority rule has a robust positive impact on various types of tax revenues and government expenditures

the dynamics of political compromise we characterize efficient self enforcing divisions of political or economic surplus between two parties that interact repeatedly the party in power can decide the allocation and the parties political strength changes according to a markov process we find that the share of the party currently in power depends not only on its current strength but also on whether it had previously been even stronger since it last came to power we find that the constitutional supermajority requirements that attempt to constrain the use of power can counterproductively create less compromise

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

dumping and signaling abstract a model of predatory dumping based upon incomplete and asymmetric information is developed the foreign firm may induce exit by the home firm through acting like a low cost competitor irrespective of its actual costs the home firm must infer the foreign firm s cost through its export price by tying the export price to the price that the foreign firm charges in the foreign market a home county antidumping law raises the cost of signaling low production costs to the home producer the law has signal enhancing or inhibiting effects which may adversely affect the home firm with ambiguous welfare consequences

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

antidumping investigations and the pass through of antidumping duties and exchange rates comment well in excess of 100 percent based on their understanding of the us antidumping calculation however the hypothesis is based on an incorrect understanding of the antidumping calculation under us law when corrected for this error the hypothesis would lead to a prediction of simple 100 percent pass through at most dumping refers to selling a product in an export market at less than its normal value a benchmark that is most commonly based on sales in the domestic market of the same product antidumping laws set tariffs to offset the amount of dumping the excess of normal value over export price in us practice a dumping complaint is brought on behalf of an industry against rival imports with the cases defined by product and by country a successful case results in the potential imposition of antidumping duties over and above any normal tariffs an unsuccessful case results in no duties being imposed american antidumping law and practice have the somewhat unusual characteristic that anti dumping duties are estimated and used to set duty deposits for a forward looking period in an initial investigation then are recalculated and actually assessed for the same period now back ward looking in a later review with some variation the later review is typically completed about two years after the initial investigation the review sets a new deposit rate and a second review determines the actual assessment rate retrospectively this can be repeated indefinitely the ini tial duty estimate resulting in a deposit rate allows companies to modify their pricing behavior so as to affect the actual dumping duties that are later assessed blonigen and haynes exploit this characteristic of the us administration of its antidump ing law to examine the effects of the imposition of antidumping duties on the pass through to us pricing the dumping investigation and resulting deposit rate provide information that the company can use in its subsequent sales in order to reduce or eliminate its dumping liability in the eventual review by comparing the antidumping deposit rates with eventual us pricing the degree of pass through of antidumping deposits can be estimated and the effects on exchange rate pass through of a potential antidumping dumping duty can be studied here i focus on the factual underpinnings that lead to blonigen and haynes s pricing model rather than the empirical results that model predicts that the method by which the us department of commerce usdoc calculates ad duties will lead to pass through of estimated antidump ing duties at twice the level of those estimated duties if companies wish to eliminate the eventual dumping duties by studying the outcomes of a series of ad cases concerning steel from canada they conclude that pass through of estimated duties exceeds 160 percent broadly consistent with

predation reputation and entry deterrence abstract economists often argue that predatory practices are irrational since there exist cheaper or more certain means to gain or maintain a monopoly our gametheoretic equilibrium analysis suggests that if a firm is threatened by several potential entrants then predation may be rational against early entrants even if it is costly when viewed in isolation because it yields a reputation which deters other entrants asymmetric information plays a crucial role in our analysis since it provides the rationale for entrants to base their expectations of the firm s future behavior on its past actions the analysis also suggests methods to treat general reputational phenomena

dumping as a signal of innovation in the r d intensive industries where technologies change rapidly an innovative foreign firm may need to export greater than normal quantities to signal the level of the new technology it possesses we find that such actions lead to sales below cost if the foreign firm has a relatively poor reputation for innovation has a sufficiently high discount factor or possesses a new technology that significantly cuts its cost we also show that antidumping reduces the costs of signaling benefits the home firm and may raise the profit to the foreign firm in the pre duty period

a protectionist bias in majoritarian politics we develop a novel model of campaigns elections and policy making in which the ex ante objectives of national party leaders differ from the ex post objectives of elected legislators this generates a distinction between policy rhetoric and policy reality and introduces an important role for party discipline in the policy making process we identify a protectionist bias in majoritarian politics when trade policy is chosen by the majority delegation and legislators in the minority have limited means to influence choices the parties announce trade policies that favor specific factors and the expected tariff or export subsidy is positive positions and expected outcomes monotonically approach free trade as party discipline strengthens i introduction in a democracy the majority rules often this means that the policies enacted by elected governments reflect the preferences of some citizens more than those of others this feature of democracy commonly known as tyranny of the majority arises in institutional settings in which elected officials represent disproportionately the interests of their own constituents and electees who represent the minority have limited means to influence policy in this paper we argue that tyranny of the majority imparts a protectionist bias to democratic politics this is so even when the average citizen covets free trade and when every citizen has an equal probability of being represented in the policy making process by protection we mean policies that favor quasi fixed factors of production thus protection in our parlance refers both to tariffs that shield import competing industries from foreign competition and subsidies that promote exports the bias refers to the average or expected policy outcome we focus on majoritarian systems in which elected legislators represent geographic regions the existence of a protectionist bias requires only that i national party leaders cannot fully commit their candidates to adopt particular policies if elected ii mem

on dynamic compromise abstract most legislatures require the consent of only a simple majority to pass a proposal so why don t legislative outcomes favor only a bare majority we show that compromise can be achieved if legislators are neither too impatient nor too patient and initial allocations are not too unequal the compromise is only sustainable if starting from the unequal allocations there is a possibility of spiraling towards a complete absence of compromise we find that the range of discount factors for which the equilibrium exists increases as the number of legislators increases in this sense compromise is easier in larger legislatures

capacity and entry under demand uncertainty this paper examines the decision to enter into a sector dominated by a monopoly if demand is random at entry time given a two period world the monopolist enters initially and enjoys an uncontested monopoly for one period while the entrant may enter and compete during the second period demand is random one period earlier and independently distributed in both periods and enitry corresponds to an irreversible capacity choice made under certain deimand all other production decisions take place after demand has been revealed risk neutrality is assumed on both sides if entry occurs then there is a cournot duopoly in the second period it is shown that concurrently with this cournot production game there is a separate stackelbergtype game with capacities as decision variables entry deterrence conditions are derived under general demand and cost assumptions it is shown that demand uncertainty changes several of the results of similar certain demand models

foreign investment quotas and rent extraction under uncertainty abstract this study examines the effects of quantitative restrictions on foreign firms entry into a domestic industry foreign firms investment policy and the equilibrium value of their entry right are studied under various rationing and rent extracting schemes when foreign firms are left free to compete for the scarcity rents induced by a quota their policy exhibits a suboptimal rent run entry occurs at the optimal pace only until a threshold level of investment is reached the last group of firms enters early and dumps output at below marginal cost

endogenous protection foreign direct investment and protection building trade abstract we introduce the possibility of foreign direct investment fdi in a strategic oligopolistic setting with endogenous protection and find that a number of unique subgame perfect equilibria may arise including a new result we call protection building trade this phenomenon occurs in our model when foreign firms locating production in the home country try to increase protectionist pressures in the home country through increased exports to provide larger barriers against other foreign competitors in future periods we discuss how the foreign firm behavior surrounding significant u s protectionist actions including the vers on japanese automobiles may be consistent with protection building trade behavior

procedural choice in majoritarian organizations a puzzling feature of self governing organizations is persistent majority support for restrictive seemingly nonmajoritarian procedures e g chairs and committees this article provides a theory of self enforcing majoritarian commitment to restrictive procedures we ask 1 why majorities consent to restrictive procedures in the first place 2 why restrictive procedures survive challenges thereafter and 3 with what policy consequences in the model a risk averse majority allocates procedural rights to increase procedural efficiency i e reduce the procedural uncertainty of free for all bargaining an equilibrium procedure is generally asymmetric and restrictive generating nonmajoritarian policy bias still a majority may persist in endorsing it so as to avoid amplifying procedural and policy uncertainty

credible communication in dynastic government abstract this paper studies information disclosure in a model of dynastic government when information about past policy choices comes exclusively from the reports of previous administrations each administration has an incentive to choose its suboptimal one shot expenditure policy and then misrepresent its choice to its successor consequently it has been suggested that horizontal accountability i e a system of governance where auditing functions lie outside the executive branch can ensure credible disclosure of a government s activities this paper suggests a cautious approach to that view the baseline model examines the reporting incentives of an external auditor who can independently verify the information each period even with auditing credible disclosure is shown to be problematic various extensions to this baseline model are examined in one extension liberal i e those prefering larger government expenditures and conservative those prefering smaller expenditures regimes and auditors evolve over time it is shown that conservative liberal auditors are not credible when the current regime is also conservative liberal moreover because information transmission stops when the auditor s and the regime s biases coincide effective deterrents even in the good periods when the auditor s and the administration s biases differ are difficult to construct in all periods the equilibrium requirement of auditor neutrality constrains the dynamic incentives for efficient policy choices these constraints are shown to bind away from optimal policies in standard constructions of equilibrium various ways in which auditing protocols can overcome these problems are discussed

barriers to investment in polarized societies i present a tractable dynamic model of political economy where disagreements about the composition of public spending result in implementation of short sighted policies the relative price of investment to consumption is excessively large in equilibrium due to over taxation investment rates are too low which slows down growth along the transition in the long run this results in output consumption and welfare being inefficiently low the larger is the degree of polarization the greater is the inefficiency political stability mitigates the effects of polarization by making the incumbent internalize the dynamic inefficiencies introduced by the choice of growth retarding policies

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

dynamics and discriminatory import policy although the general agreement on trade and tariffs prohibits discriminatory import tariffs gatt rules include means by which this prohibition can be circumvented the previous literature use static models to show that discriminatory tariffs increase welfare in a dynamic model this is not necessarily true for example with consumer switching costs current market share is valuable in this case discriminatory tariffs are higher for firms with a higher market share in expectation of such policies firms price less aggressively if switching costs are significant relative to exporting country asymmetries then this adverse affect on incentives can result in lower importing country welfare this suggests that it might be in the interests of importers to abide by the gatt mfn principle

rationalizing agricultural export subsidies export subsidies are an important form of agricultural policy especially for large traders such as the united states and the european community a number of small countries also use export subsidies in effect e g saudi arabian wheat or canadian dairy products in that the domestic price is set well above world levels and surplus production is dumped onto the world market a number of recent contributions to trade theory have argued that export subsidies can be welfare enhancing for the subsidizing country and by implication that the policy choice is consistent with the hypothesis that a benevolent government is pursuing pareto efficiency in the present paper we examine these arguments and present an alternative explanation of export subsidies utilizing the concept of efficient redistribution becker gardner 1983 in standard trade models arguments in favor of global export subsidies arise from failure to exploit market power in another good itoh and kiyono feenstra itoh and kiyono use a threegood model to show that subsidies on marginal goods defined as goods not exported at all or exported in small quantities can increase welfare in the subsidizing country a subsidy on marginal goods causes their production to increase and the supply of nonmarginal goods to decrease thereby raising the price of the nonmarginal goods and increasing the exporter s terms of trade feenstra also employs a threegood model and demonstrates that it is possible for the pattern of substitutability and complementarity across goods to allow subsidies to increase welfare the necessary condition is that the subsidized export be a stronger substitute for another exported good or a stronger complement for an imported good in the subsidizing country than abroad the export subsidy increases welfare by improving the terms of trade in the other imported or exported good the distortion in feenstra s model is the failure to exploit market power in the second or third market as an alternative to global export subsidies abbott paarlberg and sharples aps have examined targeted export subsidies and found that in some circumstances they can be welfare improving dutton later showed the aps result arises because they first constrain the export tax to the rest of the world to be zero so that it becomes theoretically possible for the best export tax to the targeted country to be negative the aps result hinges on differences in import demand elasticities and the exporting country s use of market power in order to price discrim

voluntary export restraints and strategic technology transfers abstract this paper investigates the effects of voluntary export restraints vers in the presence of potential entrants and technology transfers it builds a model of a licensing game in a cournot oligopoly market and examines conditions under which vers induce restrained foreign firms to transfer technologies to potential suppliers i show that a ver can decrease the profit and output of the domestic incumbent by perturbing the no licensing equilibrium reached under free trade and inducing the market to move to a licensing equilibrium

anti dumping a growing problem in international trade this paper discusses the issue of anti dumping ad proliferation ad is used more frequently by more countries and against more products than ever in its history i review ad filing patterns with an emphasis on the scope of countries and industries seeking protection recent trends suggest that the widespread embrace of ad protection makes the prospect for ad reform increasingly unlikely ad is no longer being used solely by high income developed countries it is increasingly being used by middle income and even lower income countries new users have chosen to use ad very intensively per dollar of imports the new users have filed ad cases up to 15 20 times more frequently than the traditional ad users such as the us and eu the evolving set of ad users complicates ad negotiations in the near term strong opposition by the us and eu makes reform a highly unlikely outcome in the longer run rising use of ad against the us and eu could conceivably weaken their support for ad yet the same trends that might finally cause the us and eu to realise ad is a failed policy will likely make reform impossible

infinitely repeated games with public monitoring and monetary transfers this paper studies infinitely repeated games with imperfect public monitoring and the possibility of monetary transfers it is shown that all public perfect equilibrium payoffs can be implemented with a simple class of stationary equilibria that use stick and carrot punishments a fast algorithm is developed that exactly computes the set of pure strategies equilibrium payoffs for all discount factors

bilateral bargaining with endogenous status quo abstract we consider a non cooperative bargaining game where in each round if a proposal is rejected with a probability the allocation implemented in the previous round is implemented as a status quo and the game proceeds to the next round and with the complementary probability no allocations are implemented and the negotiations break down we show that there exists a unique stationary subgame perfect equilibrium such that in any round a proposer offers a proposal such that the responder is indifferent between accepting and rejecting it and an agreement is achieved if the probability of breakdown is close to zero the sequence of equilibrium allocations evolves from the initial status quo to an allocation near the equilibrium allocation of the rubinstein bargaining game over time the effect of the initial status quo on the equilibrium allocations vanishes over time

sales taxes and internet commerce we estimate the sensitivity of internet retail purchasing to sales taxes using ebay data our first approach exploits the fact that a seller s location and therefore the applicable tax rate is revealed only after a buyer has expressed interest in an item we document how adverse tax surprises reduce the likelihood of purchase and shift subsequent purchases toward out of state sellers we then use more aggregated data to estimate that every one percentage point increase in a state s sales tax increases online purchases by state residents by almost 2 percent while decreasing their online purchases from state retailers by 3 4 percent jel h71 l81 l86

institutional barriers to policy reform in egypt the case of the agricultural machinery industry abstract economic reform has been on the egyptian policy agenda since the mid 1970s but progress has been slow in part due to strong regulatory and institutional obstacles the experience of the agricultural machinery manufacturing industry displays this problem an economic analysis of manufacturing threshers shows that while the impact of price policies was about neutral institutional barriers effectively taxed the industry 15 22 the greatest obstacle was access to marketing credit from the state owned principal bank for development and agricultural credit access to materials and difficulties with tax authorities also hampered the industry

the dynamics of aggregate partisanship despite extensive research on party identification links between partisanship at the individual and aggregate level have largely been ignored this leaves a gap in our understanding of the dynamics of aggregate partisanship to remedy this we identify a set of ideal types that capture the essential arguments made about individual level party identification we then combine the behavioral assumptions for each type with existing results on statistical aggregation to deduce the specific temporal pattern that each type implies for aggregate levels of partisanship using new diagnostic tests and a highly general time series model we find that aggregate measures of partisanship from 1953 through 1992 are fractionally integrated our evidence that the effects of a shock to aggregate partisanship last for years not months or decades challenges previous work by party systems theorists and students of macropartisanship our arguments and empirical evidence provide a conceptually richer and more precise basis for theories of issue evolution or endogenous preferences in which partisanship plays a central role

signaling future actions and the potential for sacrifice we consider extensions of games where some players have the option of signaling future actions by incurring costs the main result is that in a class of games if one player can incur costs then forwards induction selects her most preferred outcome surprisingly the player does not have to incur any costs to achieve this the option alone suffices however when all players can incur costs one player s attempt to signal a future action is vulnerable to a counter signal by the opponent this vulnerability to counter signaling distinguishes signaling future actions from signaling types

mandatory versus discretionary spending the status quo eect do mandatory spending programs such as medicare improve eciency we analyze a model with two parties allocating a xed budget to a public good and private transfers each period over an innite horizon we compare two institutions that dier in whether public good spending is discretionary or mandatory we model mandatory spending as an endogenous status quo since it is enacted by law and remains in eect until changed mandatory programs result in higher public good spending furthermore they ex ante pareto dominate discretionary programs when parties are patient persistence of power is low and polarization is low

supermajority rule and bicameral bargaining this paper revisits the claim that supermajority rules and bicameral legislative structures restrain excessive government spending and taxation our analysis suggests that the extension effect of a supermajority rule that requires logrolling across additional members increases with the ratio of seats in the house relative to seats in the senate using a panel of us states 1970 2008 we find that the ratio of house to senate seats has a robust positive impact on the tendency of a supermajority rule to inflate the budget our finding implies that a supermajority rule can have a perverse effect on budget outcomes in bicameral legislatures owing to two factors the geographic overlap between chambers and the low price elasticity of demand for public goods

can negotiations prevent fish wars abstract the standard alternating offer model is extended by integrating it with the levhari and mirman fish war model in order to investigate negotiations over fish quota the disagreement actions are endogenous the interior and linear markov perfect equilibrium mpe results in immediate agreement on an efficient path of fish quota this mpe is not analytically tractable numerical solutions show that patience is a disadvantage in this mpe and small differences in patience lead to large asymmetries in the bargaining outcome

strategic bargaining with destructive power abstract this note studies a two player alternating offers bargaining model in which one of the agents has the ability to damage permanently the pie bargained over beside the rubinsteinian bilateral monopoly outcome i show that it is possible to select a harming equilibrium in which the sequence of damages to the pie is endogenously determined

the political economy of dilatory reform egypt in the 1980s abstract the paper explores the political economy of egypt s failure to implement policy reforms during the 1980s despite mounting problems of international indebtedness macroeconomics imbalances microdistortions lack of employment creation and the need for poverty alleviation after reviewing the size and origins of these problems the causes of reform failure are analyzed these causes lie in domestic blockages particularly the role of interest groups and especially in strategic rents the egyptian government s skillful exploitation of its political role in the region to extract unique favors from the united states and with us influence from the international monetary fund imf the paper concludes with an interpretation of the may 1991 agreement with the imf reached after the gulf war

political economy of mechanisms we study the optimal mirrlees taxation problem in a dynamic economy in contrast to the standard approach where the taxation mechanism is operated by a benevolent planner with full commitment power we focus on economies in which policy decisions are made by self interested politicians who cannot commit to policies the society controls politicians using elections we show that the provision of incentives to politicians can be partly separated from redistribution across agents and that political economy constraints can be modeled as introducing additional aggregate distortions in the dynamic mirrlees problem we provide conditions under which the political economy distortions persist or disappear in the long run if the politicians are as patient as the agents the best sustainable mechanism leads to an asymptotic allocation where the aggregate distortions arising from political economy disappear in contrast when politicians are less patient than the citizens positive aggregate labor and capital taxes remain even asymptotically we conclude by providing a brief comparison of centralized

do safeguard tariffs and antidumping duties open or close technology gaps abstract this paper examines how the country breadth of tariff protection can affect the technology adoption decisions of both domestic import competing and foreign exporting firms the contribution of the analysis is to show how firm level technology adoption changes under tariffs of different country breadth i show that a country specific tariff like an antidumping duty induces both domestic import competing firms and foreign exporting firms to adopt a new technology earlier than they would under free trade in contrast a broadly applied tariff like a safeguard can accelerate technology adoption by a domestic import competing firm but will slow down technology adoption by foreign exporting firms because safeguard tariffs can delay the foreign firm s adoption of new technology the worldwide welfare costs associated with using them may be larger than is generally believed

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