Protection for Sale under Monopolistic Competition: An Empirical Investigation

• Main Author: CHANG, Pao Li
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2007
• Subjects: endogenous trade policy; campaign contribution; monopolistic competition; intrain- dustry trade; import penetration; International Economics
• Online Access: https://ink.library.smu.edu.sg/soe_research/1085; https://ink.library.smu.edu.sg/context/soe_research/article/2084/viewcontent/iit_test.pdf
• Institution: Singapore Management University

This paper proposes a general empirical framework to estimate the protection-for-sale model, where the protection regime shifts according to a sector's market structure (perfectly or monop-olistically competitive). We base the protection structure on Grossman and Helpman (1994) for the subset of perfectly competitive sectors and on Chang (2005) for the subset of monop- olistically competitive sectors. The two protection regimes are simultaneously estimated with joint constraints. The results of the J-test consistently reject the homogeneous (perfect compe- tition) protection-for-sale model often adopted in previous literature and suggest a direction of improvement toward the proposed heterogeneous protection structure model.