This paper reconsiders the political economy of protection in declining industries. I return to the Stigler-Peltzman specification of the political support function and show that this specification can be used to portray temporary protection and by assuming partially mobile capital with convex adjustment costs, realistic adjustment paths: protection is gradually reduced in response to the decline in the world price until protection is completely withdrawn. The decrease in endogenous protection is, however, not a direct consequence of the decrease in the world price as in the standard portrait of senescent industry protection. It is rather self-inflicted by the perspicacious owners of specific capital.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics
- Political Science and International Relations