Errors-in-variables bounds in a tobit model of endogenous protection

The errors-in-variables (EIV) problem is pervasive in econometrics but has not received the attention it deserves, perhaps because it is difficult to resolve. The first objective of this paper is to demonstrate the effectiven ess of recently developed methods to deal with the EIV problem in models wi th censoring. The second objective of this paper is to empirically examine, in light of the EN problem, theories of endogenous protection that have be come important in trade theory in their ability to explain why nations do n ot follow the traditional economic maxim of free trade. These theories emph asizing political-economic factors have gained momentum based on a set of e mpirical studies that have sought to prove their validity. Whether inferenc es about the theories of endogenous protection are gravely affected by erro rs in variables is examined using data on U.S. nontariff barriers with resp ect to nine developed countries. The theoretical developments in Klepper (1 988) and Klepper and Leamer (1984) are combined with a result from Levine ( 1986), which usefully extends the use of EIV diagnostics to a model with ce nsoring.