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Protection versus Free Trade: Lobbying Competition between Domestic and Foreign Firms
Author(s) -
Cai Dapeng,
Li Jie
Publication year - 2014
Publication title -
southern economic journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.762
H-Index - 58
eISSN - 2325-8012
pISSN - 0038-4038
DOI - 10.4284/0038-4038-2012.144
Subject(s) - tariff , competition (biology) , international economics , welfare , economics , international trade , domestic market , business , market economy , ecology , biology
This article considers how political interaction between policymakers and domestic and foreign firms endogenously determines tariff rates. We show that because of lobbying competition between foreign and domestic firms, even a less competitive foreign firm can successfully elicit a tariff reduction under reasonable conditions. Moreover, lobbying competition may also increase the level of aggregate domestic welfare when the market powers of the competing firms are sufficiently alike.