Collective Action and Protection
Centre for International Economic Studies Working Paper No. 17
41 Pages Posted: 3 Jul 2000
Date Written: March 2000
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: Suggested Citation