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DECTI Trade Seminar: Protection for Free? The Political Economy of U.S. Tariff Suspensions

Location:   MC3-570
Begins:   Oct 18, 2010 14:30
Ends:   Oct 18, 2010 16:00
Contact Person:   Yasmin D Souza

SpeakerPrachi Mishra, IMF

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

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