Article ID Journal Published Year Pages File Type
5053209 Economic Modelling 2017 10 Pages PDF
Abstract

•We develop broader theoretical micro-foundations for measuring free-riding and investigate the determinants of tariff rates from the perspective of corporate lobbying and free-riding.•The less competitive an industry, the more lobbying for protection due to a smaller chance of free-riding. As a result, economic inefficiency manifests when an industry is less competitive, such as the case with monopolies and oligopolies.•The simulated tariff rates under monopoly are 8 times higher than those under perfect competition in most industries. This suggests that more concentrated industries keep the protection level higher through lobbying.

Even though there is a well-known empirical and theoretical link between lobby and the free-rider problem, the existing literature only attributes its findings to the free-rider rather than the measurement of its extent. We develop broader theoretical micro-foundations for measuring free-riding and investigate the determinants of tariff rates from the perspective of corporate lobbying and free-riding. Our estimation result shows that the degree of free-riding not only varies across industries but is particularly high in larger industries indicating the underutilization of lobbying. The tariff rates under monopoly are about 8 times higher than under perfect competition in most industries suggesting that stakeholders should maintain higher industry protection levels through lobbying.

Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
Authors
, , ,