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Rent destruction and the political viability of free trade agreements

Ornelas, Emanuel (2005) Rent destruction and the political viability of free trade agreements. The Quarterly Journal of Economics, 120 (4). pp. 1475-1506. ISSN 0033-5533

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Abstract

This paper studies the political viability of free trade agreements (FTAs). The key element of the analysis is the "rent destruction" that these arrangements induce: by eliminating intrabloc trade barriers, an FTA lowers the incentives of import-competing industries to lobby for higher external tariffs, thereby inducing a reduction of the rents created in the lobbying process. Using a conventional competitive model, I show that the prospect of rent destruction can critically undermine (and in some cases rule out entirely) the political viability of welfarereducing FTAs. This result contrasts sharply with findings from the earlier regionalism literature.

Item Type: Article
Official URL: http://qje.oxfordjournals.org/
Additional Information: © 2005 President and Fellows of Harvard College and the Massachusetts Institute of Technology
Library of Congress subject classification: H Social Sciences > HF Commerce
J Political Science > JZ International relations
Journal of Economic Literature Classification System: F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
F - International Economics > F1 - Trade > F15 - Economic Integration
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 22 Jul 2011 15:56
URL: http://eprints.lse.ac.uk/37553/

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