Food Protection for Sale

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In this Subject: Economics
By this author: Lopez, Rigoberto A. ;&nbsp; Matschke, Xenia

Authors: Lopez, Rigoberto A.; Matschke, Xenia

Source: Review of International Economics, Volume 14, Number 3, August 2006 , pp. 380-391(12)

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Abstract:

This article tests the Protection for Sale (PFS) model using detailed data from US food-processing industries under alternative import-demand specifications. All empirical results support the PFS model predictions and previous empirical work qualitatively. However, a surprising result is that we obtain weights between 2.6 and 3.6 for domestic welfare using import slopes or elasticities derived from domestic demand and supply functions. In contrast, results based on directly specified import demands (including the Armington model) yield the usual, unrealistically large estimates for the domestic welfare weight. We contend that this empirical paradox arises mainly because the explanatory variables tend to be extremely large for industries with low import ratios and/or low import elasticities (or slopes) resulting from relatively volatile import prices. The results with derived import parameters point to a much stronger role of campaign contributions within the PFS model than previously found.

Document Type: Research article

DOI: http://dx.doi.org/10.1111/j.1467-9396.2006.00630.x

Publication date: 2006-08-01