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Discussion Paper Details

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Title: Protection for Free? The Political Economy of U.S. Tariff Suspensions

Author(s): Rodney D Ludema, Anna Maria Mayda and Prachi Mishra

Publication Date: July 2010

Keyword(s): cheap talk, endogenous protection and Tariff suspensions

Programme Area(s): International Trade and Regional Economics

Abstract: 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.

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Bibliographic Reference

Ludema, R, Mayda, A and Mishra, P. 2010. 'Protection for Free? The Political Economy of U.S. Tariff Suspensions'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=7926