Rents and the means of protection
Hosted by Ian MacKenzie
We study the political-economy foundations of the choice of the means of protection, building on the asymmetry that in high-income countries revenue provided by a tariff is usually insignificant for budgetary finance whereas quotas provide politically assignable rents that can be significant for private incomes. Societal latitude in permitting political assignment of rents and asymmetric information between political decision makers and voters underlie a prediction of use of quotas. We propose that commitment explains sequencing of elimination of quotas and tariffs in trade liberalization agreements. Our study bears upon the debate regarding efficiency of political income distribution.