EXOGENOUS TARIFF CHANGES WITH AN ENDOGENOUS LOBBYING RESPONSE

As pointed out by Krueger (1993a, 1993b), changes in policy which are exogenous to the lobbying process may lead to a vicious circle of prot ectionism. A sector which receives protection will tend to grow, there by increasing the constituency for greater protection and reducing the constituency which opposes protection. The possibility of such a vici ous circle is examined in the context of a trade model where capital, which is immobile in the short run, may lobby for a sector specific im port tariff. If costs associated with overcoming the free rider proble m do not rise too quickly, exogenous policy changes will be reinforced by the endogenous lobbying response, as capital flows into the protec ted sector in the long run. The implications of lobbying by third part ies versus lobbying by the specific factors themselves are also examin ed.