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Trade Policy Formation when Geography Matters for Specialisation

Thede, Susanna LU (2005) In UCD Centre for Economic Research Working Paper Series, 05/19.
Abstract
In this paper, trade policy formation is incorporated into an

economic geography model. The political setup used is a modified version of that introduced by Grossman and Helpman (1994)

in which policy makers may be in‡uenced by lobbying contributions. On the basis of the underlying trade framework, lobbying

activity is performed in benefit of capital interests. Optimal policy outcomes indicate that the largest countries and countries

that are disadvantaged by trade regulation favour trade liberalisation. Moreover, the optimal domestic policy is more open to

trade when the local and global competition facing domestic firms

is less fierce, the welfare dependency on manufacturing... (More)
In this paper, trade policy formation is incorporated into an

economic geography model. The political setup used is a modified version of that introduced by Grossman and Helpman (1994)

in which policy makers may be in‡uenced by lobbying contributions. On the basis of the underlying trade framework, lobbying

activity is performed in benefit of capital interests. Optimal policy outcomes indicate that the largest countries and countries

that are disadvantaged by trade regulation favour trade liberalisation. Moreover, the optimal domestic policy is more open to

trade when the local and global competition facing domestic firms

is less fierce, the welfare dependency on manufacturing imports

is larger and when there is a more intense preference for variety

in consumption. It is shown that the lobbying influence on policy is

increasing in the concentration of capital ownership in the population. It is also revealed that, in the cases when domestic special

and general interests do not coincide, lobbying activity is performed to liberalise trade. In addition, this actually implies that

the presence of lobbying influence on policy raises the long-run

national welfare. (Less)
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Working Paper
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submitted
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in
UCD Centre for Economic Research Working Paper Series, 05/19.
language
English
LU publication?
no
id
43554f0a-ed43-45f5-bd5c-4a16bd14145d (old id 1763309)
date added to LUP
2011-01-18 14:43:31
date last changed
2016-06-29 09:05:43
@misc{43554f0a-ed43-45f5-bd5c-4a16bd14145d,
  abstract     = {In this paper, trade policy formation is incorporated into an<br/><br>
economic geography model. The political setup used is a modified version of that introduced by Grossman and Helpman (1994)<br/><br>
in which policy makers may be in‡uenced by lobbying contributions. On the basis of the underlying trade framework, lobbying<br/><br>
activity is performed in benefit of capital interests. Optimal policy outcomes indicate that the largest countries and countries<br/><br>
that are disadvantaged by trade regulation favour trade liberalisation. Moreover, the optimal domestic policy is more open to<br/><br>
trade when the local and global competition facing domestic firms<br/><br>
is less fierce, the welfare dependency on manufacturing imports<br/><br>
is larger and when there is a more intense preference for variety<br/><br>
in consumption. It is shown that the lobbying influence on policy is<br/><br>
increasing in the concentration of capital ownership in the population. It is also revealed that, in the cases when domestic special<br/><br>
and general interests do not coincide, lobbying activity is performed to liberalise trade. In addition, this actually implies that<br/><br>
the presence of lobbying influence on policy raises the long-run<br/><br>
national welfare.},
  author       = {Thede, Susanna},
  language     = {eng},
  note         = {Working Paper},
  series       = {UCD Centre for Economic Research Working Paper Series, 05/19.},
  title        = {Trade Policy Formation when Geography Matters for Specialisation},
  year         = {2005},
}