The Grossman-Helpman "Protection for Sale" model, concerning the political economy of trade protection, yields clear predictions for the cross-sectional structure of import barriers. Our objective is to check whether the predictions of the Grossman-Helpman model are consistent with the data and, if the model finds support, to estimate its key structural parameters. We find that the pattern of protection in the United States in 1983 is broadly consistent with the predictions of the model. A surprising finding is that the weight of welfare in the government's objective function is many times larger than the weight of contributions.

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We would like to thank: the firm that kindly provided its personnel data; Maria Benvenuti for giving us access to her classification of misconduct episodes; Lawrence Katz and Edward Glaeser for suggestions that led to a substantial improvement of the paper;

JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. The University of Chicago Press is collaborating with JSTOR to digitize, preserve and extend access to Journal of Political Economy.An argument often heard in favor of trade agreements is that, by committing to free trade, a government can credibly distance itself from domestic lobbies. But several existing models of endogenous protection suggest that governments have no interest in foreclosing interest group pressures since governments derive rents from the political process. We develop a small-country model in which factors are sector-specific in the short run but mobile in the long run. We show that in this setting a government may be worse off in the political equilibrium than under commitment to free trade, and hence it may value a trade agreement.

The World Trade Organization (WFO) lacks the power to directly enforce agreements. It is, therefore, important to understand what role the WTO can play to facilitate international cooperation and whether a multilateral institution can offer distinct advantages over a web of bilateral agreements. This paper examines two potential benefits of a multilateral trade institution: first, verifying violations of the agreements and informing third parties, thus facilitating multilateral reputation mechanisms; second, promoting multilateral trade negotiations rather than a web of bilateral negotiations. The model suggests that a multilateral approach is particularly important when there are strong imbalances in bilateral trading relationships.

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In this paper we model contract incompleteness "from the ground up," as arising endogenously from the costs of describing the environment and the parties' behavior. Optimal contracts may exhibit two forms of incompleteness: discretion, meaning that the contract does not specify the parties' behavior with sufficient detail; and rigidity, meaning that the parties' obligations are not sufficiently contingent on the external state. The model sheds light on the determinants of rigidity and discretion in contracts, and yields rich predictions regarding the impact of changes in the exogenous parameters on the degree and form of contract incompleteness. (JEL D23, D8, L14)