Collective Action and Protection

Centre for International Economic Studies Working Paper No. 17

41 Pages Posted: 3 Jul 2000

See all articles by Richard Damania

Richard Damania

World Bank; University of Adelaide - School of Economics

Per G. Fredriksson

University of Louisville - College of Business - Department of Economics; Institute for Corruption Studies

Date Written: March 2000

Abstract

Empirically collusive industries are known to be highly effective lobbyists. The reasons for this unclear and poorly understood. This paper provides a new explanation for the formation of protectionistic lobby groups. The level of collusion is shown to be a crucial determinant of the ability of firms to sustain lobbying. It is demonstrated that a critical determinant of the degree of protection obtained depends upon the cross price elasticity of demand between the domestic good and the foreign import. We thus provide an explanation for the mixed empirical evidence on the effect of industry concentration on protection. Finally, the equilibrium tariff rate in imperfectly competitive sectors is determined, which yields new insights into the determination of tariffs.

Keywords: Lobby Group Formation, Endogenous Tariff Formation

JEL Classification: D70, F13

Suggested Citation

Damania, Richard and Fredriksson, Per G., Collective Action and Protection (March 2000). Centre for International Economic Studies Working Paper No. 17, Available at SSRN: https://ssrn.com/abstract=231204 or http://dx.doi.org/10.2139/ssrn.231204

Richard Damania (Contact Author)

World Bank ( email )

1818 H Street, N.W.
Washington, DC 20433
United States

University of Adelaide - School of Economics ( email )

Adelaide SA, 5005
Australia
+61 8 8303 4933 (Phone)
+61 8 8223 1460 (Fax)

Per G. Fredriksson

University of Louisville - College of Business - Department of Economics ( email )

Louisville, KY 40292
United States

Institute for Corruption Studies

Stevenson Hall 425
Normal, IL 61790-4200
United States

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