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Can we obtain realistic parameter estimates for the ‘protection for sale’ model?
Author(s) -
Mitra Devashish,
Thomakos Dimitrios D.,
Ulubaşoğlu Mehmet
Publication year - 2006
Publication title -
canadian journal of economics/revue canadienne d'économique
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.773
H-Index - 69
eISSN - 1540-5982
pISSN - 0008-4085
DOI - 10.1111/j.0008-4085.2006.00344.x
Subject(s) - grossman , aggregate (composite) , welfare , economics , yield (engineering) , government (linguistics) , population , econometrics , government spending , aggregate data , microeconomics , mathematics , statistics , keynesian economics , linguistics , philosophy , materials science , demography , sociology , market economy , composite material , metallurgy
. 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.