Protection for Free? The Political Economy of U.S. TariffSuspensions

Author/Editor: Mishra, Prachi ; Mayda, Anna Maria ; Ludema, Rodney D.
Publication Date: September 01, 2010
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper studies the political influence of individual firms on Congressional decisions to suspend tariffs on U.S. imports of intermediate goods. We develop a model in which firms influence the government by transmitting information about the value of protection, via costless messages (cheap-talk) and costly messages (lobbying). We estimate our model using firm-level data on tariff suspension bills and lobbying expenditures from 1999-2006, and find that indeed verbal opposition by import-competing firms, with no lobbying, significantly reduces the probability of a suspension being granted. In addition, lobbying expenditures by proponent and opponent firms sway this probability in opposite directions.
Series: Working Paper No. 10/211
Subject(s): Corporate sector | Economic models | Import tariffs | Imports | Political economy | Tariff structures | Trade policy | United States

Author's Keyword(s): trade policy | political economy
Publication Date: September 01, 2010
Format: Paper
Stock No: WPIEA2010211 Pages: 48
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