Endogenous political organization and the value of trade agreements

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28 Scopus citations

Abstract

In a bargaining model of endogenous protection, I introduce fixed costs of political-organization that need to be incurred by capitalists prior to actual lobbying. Unlike Maggi and Rodriguez-Clare [J. Pol. Econ. 106(3) (1998) 575] intersectoral capital mobility is disallowed. Nevertheless, I am still able to obtain their main result that a government with low bargaining power vis-à-vis the import-competing lobby precommits to a free-trade agreement. Further, with high fixed organizational costs, the government prefers to stay out of such agreements. Its maximum bargaining power consistent with signing a trade agreement has an inverse-V-shaped relationship with respect to the size of fixed costs.

Original languageEnglish (US)
Pages (from-to)473-485
Number of pages13
JournalJournal of International Economics
Volume57
Issue number2
DOIs
StatePublished - Jul 17 2002
Externally publishedYes

Keywords

  • Bargaining
  • Lobbying
  • Political organization
  • Trade agreements
  • Trade policy

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics

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