Protection for Sale: An Empirical Investigation: Comment

Abstract

Do contributions levels matter for endogenous protection or is the existence of a lobby sufficient? Are lobbies' net benefits from protection identical to their contribution levels, or does the level of protection simply reflect contribution levels of supporters and opponents? We estimate the Influence Driven (Grossman and Helpman, 1994) and the Tariff Function (Findlay and Wellisz, 1982) models within a unified theoretical framework to examine the contrasting implications derived from these two prominent tariff formation models. We find strong evidence that protection is indeed "for sale." The important new result is, however, that not only the existence of lobbies matters, but also the relative size of the sectoral pro and anti protection contributions. Using J tests to compare the power of the models directly, we cannot reject the null of correct specification of the Influence Driven model and find evidence of some misspecification in the Tariff Function model.

Costly revenue-raising and the case for favoring import-competing industries

“…Point estimates for the percentage of the population represented by lobbies Θ lie between 5.93% for the XMsig case and 47.42% for the GB case. They seem quite reasonable and are close to the estimates reported by Eicher and Osang (2002) and lower than those reported in Goldberg and Maggi (1999) and Gawande and Bandyopadhyay (2000). The cost parameter c is very precisely estimated as lying between 1.03 and 1.05.…”

“…The estimates obtained with these data (columns 16 This is contrary to the results with NTB coverage ratio data for the U.S. in 1983 which support the basic protection for sale model, as shown by Goldberg and Maggi (1999), Gawande and Bandyopadhyay (2000), Eicher and Osang (2002), and Matschke and Sherlund (2006). Table 3) are also very similar to the original results and provide very strong support for the cost-of-funds specification.…”

“…and Maggi (1999) and Eicher and Osang (2002). In the sensitivity analysis, I also report results when a constant term is included in the estimation equation and show that the results are very similar to the case without a constant.…”

“…The protection for sale model has been tested for the United States and other countries (e.g., Mitra, Thomakos, and Ulubasoglu (2001) for Turkey;McCalman (2004) for Australia; Cadot, Grether, and Olarreaga (2003) for India) and has been found to fit the data well. 1 Whereas studies for other countries usually employ tariff data as protection measure, studies for the United States (e.g., Goldberg and Maggi (1999), Gawande and Bandyopadhyay (2000), and Eicher and Osang (2002) to name the most influential) typically use non-tariff barrier (NTB) coverage ratios as protection 1 Although several papers in the literature find empirical evidence to support the protection for sale hypothesis, none of the tests these papers employ prove conclusively that the protection for sale model is the model generating the data; see, e.g., Goldberg and Maggi (1999) and Imai, Katayama, and Krishna (2005). The current literature's focus on the protection for sale model seems to be due to its solid micro foundations.…”

Protectionism versus risk in screening for invasive species

“…Goldberg and Maggi (1999) report a weight on social welfare of 98 percent and a weight on campaign contributions of 2 percent. Using an alternative estimation strategy, Eicher and Osang (2002) report a weight on social welfare of 96 percent. Gawande and Bandyopadhyay (2000) find that the US government places equal weight on aggregate welfare and campaign contributions.…”