Customs Union or Free Trade Area? The Role of Political Asymmetries

Bandyopadhyay, Subhayu; Wall, Howard J.

doi:10.1111/1467-9396.00191

Cited by 15 publications

(20 citation statements)

References 6 publications

(9 reference statements)

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“…Schiff and Winters (2003, page-92) worry that regional integration may accentuate cooperation of lobbying groups and raise protection. 3 In a similar vein, Bandyopadhyay and Wall (1999) present a model of cross-border lobbying and compare FTA and CU tariffs. In an FTA, tariff of a nation is determined through a tariff generating function a la Findlay and Wellisz (1982).…”

Section: Introductionmentioning

confidence: 99%

“…They find that the CET is higher than the FTA tariff unless the two member nations are symmetric. Recently Bandyopadhyay et al (2007) extended the model of Bandyopadhyay and Wall (1999) by endogenizing the tariff-formation function and examined the role of political asymmetries in the determination of the CET. The present paper adopts the model of Bandyopadhyay et al (2007) to examine the issue at hand, viz., the effect of an enlargement of the CU on the CET.…”

Section: Introductionmentioning

confidence: 99%

See 1 more Smart Citation

Enlargement and Common External Tariff in a Political-Economic Model of Customs Union

Bandyopadhyay

Lahiri

Roy

2009

Arthaniti: Journal of Economic Theory and Practice

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We present a model with three blocks of nations: two of the blocks are members of a Customs Union (CU) and maintain a common external tariff (CET) on the third (non-member). One of the member blocks is a block of new entrants. The producing lobby is assumed to be union-wide and lobbies governments of both blocks to influence the CET. The CET is determined jointly by the CU. We follow the political support function approach, where the CU seeks to maximize a weighted sum of the constituents' payoff functions. In this framework, we find the relationship between the CET and the average level of capital stock owned by the protected sector in the block of new entrants. We find that the CET is unambiguously larger if the new entrants have a larger stock of capital. JEL Classification: F13

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Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Enlargement and Common External Tariff in a Political-Economic Model of Customs Union

Bandyopadhyay

Lahiri

Roy

2009

Arthaniti: Journal of Economic Theory and Practice

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“…3 In a similar vein, Bandyopadhyay and Wall (1999) present a model of cross-border lobbying and compare FTA and CU tariffs. In an FTA, tariff of a nation is determined through a tariff generating function a la Findlay and Wellisz (1982).…”

Section: Introductionmentioning

confidence: 99%

Political Asymmetry and Common External Tariff in a Customs Union

2007

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We present a three-nation model, where two of the nations are members of a Customs Union (CU) and maintain a common external tariff (CET) on the third (non-member) nation. The producing lobby is assumed to be union-wide and lobbies both governments to influence the CET. The CET is determined jointly by the CU. We follow the political support function approach, where the CU seeks to maximize a weighted sum of the constituents' payoff functions, the weights reflecting the influence of the respective governments in the CU. A central finding of this paper is that the CET rises monotonically with the degree of asymmetry in the weights if the two countries are equally susceptible to lobbying. If the weights are the same, but the respective governments are asymmetric in their susceptibilities to lobbying, the CET also rises monotonically with this asymmetry. However, an increase in one type of asymmetry, in the presence of the other type of asymmetry, may reduce the CET. JEL Classification: F13

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“…In Yi (2000) and Kose and Riezman (2000), if the RTB is a free trade area-in which members set their own tariffs-tariffs are lower after integration. On the other hand, a customs union-in which members have a common tariff-might lead to higher post-integration tariffs (Kose andRiezman, 2000, andBandyopadhyay andWall, 1999).…”

Section: Introductionmentioning

confidence: 99%