We extend the protection for sale model of Grossman and Helpman (1994) by introducing a general model of monopolistic competition with variable markups and incomplete pass-through. We show that the structure of protection emerging in the political equilibrium not only depends on the weight attached by the government to consumer welfare when making its policy decision, but also on the degree of market power of firms and on the terms-of-trade variations due to the degree of pass-through. Our results highlight the importance of preferences in shaping the structure of protection and are consistent with the occurring of protectionism also in unorganized industries.
Annicchiarico, B., Marvasi, E. (2019). Protection for sale under monopolistic competition: Beyond the CES. EUROPEAN JOURNAL OF POLITICAL ECONOMY, 60, 101802 [10.1016/j.ejpoleco.2019.06.003].
Protection for sale under monopolistic competition: Beyond the CES
Annicchiarico B.;Marvasi E.
2019-01-01
Abstract
We extend the protection for sale model of Grossman and Helpman (1994) by introducing a general model of monopolistic competition with variable markups and incomplete pass-through. We show that the structure of protection emerging in the political equilibrium not only depends on the weight attached by the government to consumer welfare when making its policy decision, but also on the degree of market power of firms and on the terms-of-trade variations due to the degree of pass-through. Our results highlight the importance of preferences in shaping the structure of protection and are consistent with the occurring of protectionism also in unorganized industries.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
