Two essays on trade policy and interest groups.
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文摘
Essay one. Interest groups, income redistribution and optimal tariffs. Is it necessarily true that the interests of special groups always conflict with the national interest in trade policies? Are there any policies that will eliminate or reduce the distortions generated by special interest groups? This paper develops a model to address these questions and to suggest a mechanism under which interest groups will act consistently with the policies that are best for the nation. In this model, the unique optimal tariff is solved for analytically as an increasing function of the disparity among the endowments across countries. The paper also presents the necessary and sufficient conditions under which the Nash equilibrium tariff is the optimal tariff. In addition, I derive and characterize the optimal income redistribution policy which depends on the factor ownership distribution. Such a policy will alter the incentives of interest groups in seeking tariff protection so that they are induced to choose the optimal tariffs.;Essay two. Free trade equivalence and interest group lobby. Now that it is so difficult to really achieve free trade all over the world, are there any equivalencies to free trade with nonzero tariff or subsidy that can be reached, and under what circumstances they will be reached? How do interest groups influence trade policies with significant resource cost? How can one rationalize the lobbying cost, why has it been so persistent? This paper develops a model to address these questions and provide some new interpretations. The major findings in this paper are that when lobby cost can be ignored, free trade can be achieved even if with a tariff and subsidy. When the lobby cost cannot be ignored, the Keynes-Hicks theorem in the sense that free trade can be achieved with equality of tariff and subsidy breaks down. However, an alternative equivalence can be achieved for a country that has a monopoly power to set the tariff and subsidy under certain conditions. This may provide a potential answer to the puzzle of why the interest groups have been so energetic even though the resource cost due to their activities may be just wasted and not justified in that country. It is the rest of the world that is “virtually” financing the lobby activities.