Evidence and explanation for the Tariff-lobbying paradox

endogenous Tariffs fall as protectionist lobbying rises

Stephen Magee, Hongshik Lee, Junyun Kim

Research output: Contribution to journalArticle

Abstract

Recent empirical evidence suggests that U.S. protectionist lobbying expenditures rose while U.S. trade barrier fell. We find that the same result holds in our panel data sample from 28 countries between 1995 and 2011. We find two economic drivers cause the paradox between increasing protectionist lobbying and decreasing trade barrier. First, trade barriers decline as country capital-labour ratio endowments rise because of the rising political and economic power of capital that lobbies for free-trade. Second, factor intensities in production become more similar as factor-intensity convergence. This flattens the production possibility curve between exportable and import-competing production so that changes increased magnification in both factor rewards. In our panel, the magnification parameters are twice as high for capital as for labour (8.6 vs. 5.1). And, the elasticity of the capital return with respect to country capital-labour factor endowment ratios (.59) is nearly twice those of labour (.22). Increased magnification causes thus labour’s increased lobbying for protection to be more than offset by increased capital lobbying against protection. In short, while an increasing labour lobbies for protection as countries advance, combined tariff and non-tariff protection (OTRI) decline significantly as advanced countries get richer. This explains the tariff-protectionist-lobbying paradox.

Original languageEnglish
JournalApplied Economics
DOIs
Publication statusPublished - 2019 Jan 1

Fingerprint

Labor
Paradox
Tariffs
Lobbying
Trade barriers
Factor intensity
Lobbies
Economic power
Elasticity
Reward
Political power
Free trade
Factors
Empirical evidence
Expenditure
Endowments
Import
Panel data
Economics
Factor endowments

Keywords

  • Lobbying
  • Paradoxes
  • Rent seeking
  • Tariffs
  • Trade protection

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Evidence and explanation for the Tariff-lobbying paradox : endogenous Tariffs fall as protectionist lobbying rises. / Magee, Stephen; Lee, Hongshik; Kim, Junyun.

In: Applied Economics, 01.01.2019.

Research output: Contribution to journalArticle

@article{9ee5db258e9e4dc6b61413740fe4f1eb,
title = "Evidence and explanation for the Tariff-lobbying paradox: endogenous Tariffs fall as protectionist lobbying rises",
abstract = "Recent empirical evidence suggests that U.S. protectionist lobbying expenditures rose while U.S. trade barrier fell. We find that the same result holds in our panel data sample from 28 countries between 1995 and 2011. We find two economic drivers cause the paradox between increasing protectionist lobbying and decreasing trade barrier. First, trade barriers decline as country capital-labour ratio endowments rise because of the rising political and economic power of capital that lobbies for free-trade. Second, factor intensities in production become more similar as factor-intensity convergence. This flattens the production possibility curve between exportable and import-competing production so that changes increased magnification in both factor rewards. In our panel, the magnification parameters are twice as high for capital as for labour (8.6 vs. 5.1). And, the elasticity of the capital return with respect to country capital-labour factor endowment ratios (.59) is nearly twice those of labour (.22). Increased magnification causes thus labour’s increased lobbying for protection to be more than offset by increased capital lobbying against protection. In short, while an increasing labour lobbies for protection as countries advance, combined tariff and non-tariff protection (OTRI) decline significantly as advanced countries get richer. This explains the tariff-protectionist-lobbying paradox.",
keywords = "Lobbying, Paradoxes, Rent seeking, Tariffs, Trade protection",
author = "Stephen Magee and Hongshik Lee and Junyun Kim",
year = "2019",
month = "1",
day = "1",
doi = "10.1080/00036846.2019.1591604",
language = "English",
journal = "Applied Economics",
issn = "0003-6846",
publisher = "Routledge",

}

TY - JOUR

T1 - Evidence and explanation for the Tariff-lobbying paradox

T2 - endogenous Tariffs fall as protectionist lobbying rises

AU - Magee, Stephen

AU - Lee, Hongshik

AU - Kim, Junyun

PY - 2019/1/1

Y1 - 2019/1/1

N2 - Recent empirical evidence suggests that U.S. protectionist lobbying expenditures rose while U.S. trade barrier fell. We find that the same result holds in our panel data sample from 28 countries between 1995 and 2011. We find two economic drivers cause the paradox between increasing protectionist lobbying and decreasing trade barrier. First, trade barriers decline as country capital-labour ratio endowments rise because of the rising political and economic power of capital that lobbies for free-trade. Second, factor intensities in production become more similar as factor-intensity convergence. This flattens the production possibility curve between exportable and import-competing production so that changes increased magnification in both factor rewards. In our panel, the magnification parameters are twice as high for capital as for labour (8.6 vs. 5.1). And, the elasticity of the capital return with respect to country capital-labour factor endowment ratios (.59) is nearly twice those of labour (.22). Increased magnification causes thus labour’s increased lobbying for protection to be more than offset by increased capital lobbying against protection. In short, while an increasing labour lobbies for protection as countries advance, combined tariff and non-tariff protection (OTRI) decline significantly as advanced countries get richer. This explains the tariff-protectionist-lobbying paradox.

AB - Recent empirical evidence suggests that U.S. protectionist lobbying expenditures rose while U.S. trade barrier fell. We find that the same result holds in our panel data sample from 28 countries between 1995 and 2011. We find two economic drivers cause the paradox between increasing protectionist lobbying and decreasing trade barrier. First, trade barriers decline as country capital-labour ratio endowments rise because of the rising political and economic power of capital that lobbies for free-trade. Second, factor intensities in production become more similar as factor-intensity convergence. This flattens the production possibility curve between exportable and import-competing production so that changes increased magnification in both factor rewards. In our panel, the magnification parameters are twice as high for capital as for labour (8.6 vs. 5.1). And, the elasticity of the capital return with respect to country capital-labour factor endowment ratios (.59) is nearly twice those of labour (.22). Increased magnification causes thus labour’s increased lobbying for protection to be more than offset by increased capital lobbying against protection. In short, while an increasing labour lobbies for protection as countries advance, combined tariff and non-tariff protection (OTRI) decline significantly as advanced countries get richer. This explains the tariff-protectionist-lobbying paradox.

KW - Lobbying

KW - Paradoxes

KW - Rent seeking

KW - Tariffs

KW - Trade protection

UR - http://www.scopus.com/inward/record.url?scp=85063367149&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=85063367149&partnerID=8YFLogxK

U2 - 10.1080/00036846.2019.1591604

DO - 10.1080/00036846.2019.1591604

M3 - Article

JO - Applied Economics

JF - Applied Economics

SN - 0003-6846

ER -