miles; (c) a dummny indicating country i maintains a formal alliance with the United States<sup>31</sup> ; (d) the percent of all once-eligible developing countries still on the US GSP program; and (e) the US GDP growth rate (World Bank [2001b]); (f) a sufficiently lagged value of _GSP_ status itself. All are measured for year t - 1, except the last, which is for year t - 3. The US is likely to remove GSP status when it also employs national security sanctions against a target country, a criterion even written into the GSP-authorizing statute. Yet such sanctions are not directly related to the country's own import policy. Likewise, distance and alliance status affect a country's trade with the United States in particular but not its import policy overall. US macroeconomic conditions affect the pressure from domestic import-competing industries to remove _many_ significant exporting nations from GSP but have little or no effect on the target country's own import barriers. We avoid concerns about endogeneity of the lagged GSP instrument by setting the lag sufficiently deep. While all results we report below are valid without the use of the _GSPi,t.3_ instrument, it increases the explanatory power of the first-stage IV regression, and the use of stronger instruments has been shown to reduce IV bias (e.g., Staiger and Stock [1997]). We include these instruments, in addition to the right-hand-side variables in 2, in the x vector in equation 3. We verify that our instruments are properly exogenous (i.e., not correlated with E in 2): tests of overidentifying restrictions in IV models 4, 5, 6 (and 8) all fail to reject the null of exogeneity (Davidson and MacKinnon [1993]).32 Table 3 presents the IV estimates of the _Duties, Tariff_ and _Closure_ equations (models 4, 5 and 6). _GSP's_ coefficient is highly statistically significant and in the hypothesized (positive) direction in each column.<sup>3 3</sup> Indeed, the coefficients from the IV estimation are slightly higher than the respective values in the OLS estimation. (What this implies regarding the direction of the reverse causal effect, however, is irrelevant for our claim about the independent second-stage impact of GSP.) Hence, the findings in models 1, 2, and 3 are not an artifact of endogeneity, since the association between GSP status and protectionism shows up even when controlling for endogeneity bias in the IV models.

# 5.3 Other Measures of GSIP

The third set of regressions examines the impact of _GSP Fraction,,t_ instead of the _GSP_ dummy. This is a better measure of the GSP program as it measures GSP exports of country i to the United States (USITC [2002]) as a percent of its total exports in year t. Because the time series for _Dutzes_ and _Tariff_ are frequently interrupted and _GSP Fraction_ itself is only

> 3 1Distance and alliance data are from the Correlates of War Project as distributed by Bennett and Stam [2000], updated by the authors to 2000.

> 3 2 These statistics yield p = 0.548, p = 0.446, p = 0.607 for models 4, 5, 6, respectively.

> 3 3 Fit in the first-stage probit (of GSP on the instruments) is quite good in each case, all with large x2 values and pseudo-R<sup>2</sup> s around 0.5 or higher. Thus, by Staiger and Stock's [1997] rule of thumb, our instruments have more than adequate explanatory power.

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