A dynamic model of endogenous trade policy

Empirical evidence suggests that past levels of protection are significant determinants of current levels of protection. We investigate dynamic intera ctions among interest groups and resulting endogenous links between current and future trade policies. We explore these intertemporal links in a small open economy in which lobbying and tariff policies are the outcome of a dy namic game among factor owners. The model can generate cycles with prolonge d periods of free trade and/or prolonged periods of restricted trade (i.e., persistent trade policies). An interesting aspect of the environment is th e role of lobbying as a partial substitute for intertemporal trade.