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Can we Obtain Realistic Parameter Estimates for the ?Protection for Sale? Model?


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Can we Obtain Realistic Parameter Estimates for the ?Protection for Sale? Model?

Devashish Mitra, Dimitrios D. Thomakos & Mehmet A. Ulubaşoğlu

Canadian Journal of Economics
Volume 39, Issue 1, February 2006, Pages 187-210

Abstract. In the Grossman and Helpman (1994) model of endogenous trade protection, sectoral lobbies try to influence an incumbent government that maximizes a weighted sum of political contributions and aggregate welfare. We empirically investigate this model using U.S. and Turkish data. Our specification is more tightly tied to theory than those in existing studies. Additionally, we assume all specific-factor owners to be organized into different lobbies. These changes, validated by hypothesis tests, yield more realistic parameter estimates of the government's concern for aggregate welfare and of the fraction of population organized into lobbies.


DOI. 10.1111/j.0008-4085.2006.00344.x

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