Monday, September 27, 2010

Not All Trade Protections Are Created Equal

. Monday, September 27, 2010

The abstract of a new NBER paper (ungated pdf here):

Over the past decades, the steel industry has been protected by a wide variety of trade policies, both tariff- and quota-based. We exploit this extensive heterogeneity in trade protection to examine the well-established theoretical literature predicting nonequivalent effects of tariffs and quotas on domestic firms’ market power. Robust to a variety of empirical specifications with U.S. Census data on the population of U.S. steel plants from 1967-2002, we find evidence for significant market power effects for binding quota-based protection, but not for tariff-based protection. There is only weak evidence that antidumping protection increases market power.


An interesting follow-up would be to see if this dynamic affects political organization, or if industry groups learn over time to petition for quota-based rather than tariff-based protection.

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Not All Trade Protections Are Created Equal
 
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