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Protectionist Lobbying and Strategic Investment
Author(s) -
Damania Richard
Publication year - 2003
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.00078
Subject(s) - protectionism , tariff , investment (military) , incentive , economics , government (linguistics) , production (economics) , politics , industrial organization , international economics , market economy , business , public economics , microeconomics , linguistics , philosophy , political science , law
Why are some uncompetitive industry sectors so effective in lobbying for greater protection and support? This paper attempts to explain the lobbying success of these industries in terms of the strategic role of investment in technology as a credible commitment device. By eschewing potentially profitable investment opportunities firms credibly signal to the government that the cost of a tariff reduction will be substantial. This enables the firms to lobby more effectively for policy concessions. Political considerations may therefore provide a significant incentive for firms to reject investment in newer technologies, even when these lower production costs.