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| Title: | Efficient choice among domestic and trade policies in the Grossman-Helpman Interest-Group Model |
| Authors: | Schleich, Joachim
Orden, David |
| Keywords: | Political economy
trade policies
domestic subsidies and taxes
efficient policies
common agency |
| JEL Codes: | F11
F13 |
| Issue Date: | 1996 |
| Series/Report no.: | Bulletin Number 96-3 |
| Abstract: | This paper generalizes the recent political economy model of Helpman and Grossman in which contributions by producer lobbies and government decisions about trade policies are modeled as a common agency game. We allow the government to choose among domestic as well as trade interventions. When production and trade policies are available, the equilibrium production policies serve the lobbies while the trade policies reflect the country's international market power. When consumption and trade policies are available, tariffs and export subsidies are applied in a small-country model to serve the special interests, and the domestic policies are selected to restore consumer prices to world levels. In a large-country model, the optimal consumption and trade policies reflect terms-of trade as well as special-interest considerations. The political equilibrium policies of Grossman and Helpman are special cases where the government has only trade instruments at hand. |
| URI: | http://purl.umn.edu/7458 |
| Institution/Association: | University of Minnesota>Economic Development Center>Bulletins |
| Total Pages: | 29 |
| Language: | English |
| Collections: | Bulletins
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| bu960003.pdf | 977Kb | PDF | View/Open |
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