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Is Protection for Sale in U.S. Food Industries

This article tests the Grossman-Helpman Protection for Sale model using panel data from U.S. food processing industries with endogenous protection, imports, and political organization of industries. The results support the key predictions of the model: organized industries are granted higher protection that decreases with import penetration and the price elasticity of imports, but in unorganized industries protection increases with import penetration. In spite of substantial differences in data sets and empirical procedures, the estimated weight on aggregate welfare is strikingly similar those found by Goldberg and Maggi (1999) and Gawande and Bandopadhyay (2000), implying that protection is not for sale in these industries. Furthermore, the presence of import quotas raises the level of protection substantially.