Trade policy & lobbying effectiveness: theory and evidence for India

Saha, Amrita (2019) Trade policy & lobbying effectiveness: theory and evidence for India. European Journal of Political Economy, 56. pp. 165-192. ISSN 0176-2680

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Abstract

How do we understand differences in effectiveness in lobbying for trade policy? To explain lobbying effectiveness, I introduce a new measure into Grossman and Helpman's (1994, American Economic Review 84: 833–850) model of protection-for-sale (PFS). Differences in effectiveness are explained on the basis that some groups make a better case for protection by sending a signal regarding information they possess and that is considered by policy makers before setting trade policies. I begin by estimating a standard PFS model for India using a measure of political organization, a common approach in the empirical literature on PFS. To overcome the need to define such a binary political organization variable, I then use panel data to estimate the new measure of relative lobbying effectiveness. For the most effective sectors, a high output to import ratio translates into higher trade protection; for the least effective sectors, higher output to import ratio translates into lower trade protection. Examining some of the political economy influences on lobbying effectiveness, I find that producing similar goods reduces the positive effect of geographical proximity on effectiveness. Hence, within a sector, firms in close proximity and producing similar goods compete to lobby rather than cooperating or free-riding.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Institute of Development Studies
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HD Industries. Land use. Labour > HD0072 Economic development. Development economics. Economic growth
H Social Sciences > HF Commerce > HF1701 Tariff. Free trade. Protectionism
Depositing User: Amrita Saha
Date Deposited: 31 Oct 2018 16:48
Last Modified: 11 Jul 2019 15:27
URI: http://sro.sussex.ac.uk/id/eprint/79817
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