Protection for Free? the Political Economy of U.S. Tariff suspensions

Author/Editor:

Prachi Mishra ; Rodney D. Ludema ; Anna Maria Mayda

Publication Date:

September 1, 2010

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper studies the political influence of individual firms on Congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tariff suspension bills and lobbying expenditures from 1999-2006, and find that indeed verbal opposition by import-competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by proponent and opponent firms sway this probability in opposite directions.

Series:

Working Paper No. 10/211

Subject:

Corporate sector Economic models Import tariffs Imports Political economy Tariff structures Trade policy United States

English

Publication Date:

September 1, 2010

ISBN/ISSN:

9781455205424/1018-5941

Stock No:

WPIEA2010211

Format:

Paper

Pages:

48

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