Grossman Helpman (1994) - Protection For Sale

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Grossman, G. and E. Helpman (1994), Protection for Sale, American Economic Review 84, 833-50. pdf


We develop a model in which special-interest groups make political contributions in order to influence an incumbent government's choice of trade policy. The interest groups bid for protection with their campaign support. Politicians maximize their own welfare, which depends on total contributions collected and on the welfare of voters. We study the structure of protection that emerges in the political equilibrium and the contributions by different lobbies that support the policy outcome. We also discuss why the lobbies may in some cases prefer to have the government use trade policy to transfer income, rather than more efficient means.