This paper examines the rationale for the rules on domestic subsidies in international trade agreements through a framework that emphasizes commitment. We build a model where the policy-maker has a tariff and a production subsidy at its disposal, taxation can be distortionary and the...

This paper examines the rationale for the rules on domestic subsidies in international trade agreements through a framework that emphasizes commitment. We build a model where the policy-maker has a tariff and a production subsidy at its disposal, taxation can be distortionary and the...

This paper provides a simple model that highlights the political substitutability between import tariffs and production subsidies.1 When taxes are distortionary, political pressures by domestic interest groups representing the import competing sector induce the government to set inefficiently...

This paper provides a simple model that highlights the political substitutability between import tariffs and production subsidies.1 When taxes are distortionary, political pressures by domestic interest groups representing the import competing sector induce the government to set inefficiently...

The past fifty years of European integration can be seen as the result of a two-level political game: at home national governments interacted strategically with organized interest groups, while in the European arena interstate distributional conflicts were solved by bargaining. Applying this...

This paper presents a formal study of economic influence by special-interest groups under political integration and separation. We first show that countries where more groups are organized to lobby gain from political integration on economic grounds. The reason is that a more organized country,...

Models of international unions suggest that large and rich countries reap little economic benefits from political integration with smaller and poorer countries. This paper challenges this view by presenting a formal study of economic influence by special interest groups in an international...

We construct a model where firms compete in both political and economic markets. In political markets, firms compete for influence over government transfer policy (rents). This activity can be beneficial for the firm, but is purely wasteful from the point of view of society because resources are...

This paper examines the rationale for the rules on domestic subsidies in international trade agreements through a framework that emphasizes commitment. We build a model where the policy-maker has a tariff and a production subsidy at its disposal, taxation can be distortionary and the...