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5-GrossmanHelpman

5-GrossmanHelpman - Political Economy of Institutions Trade...

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Click to edit Master subtitle style 2/22/10 Lecture 5: Lobbying the Government Grossman and Helpman Political Economy of Institutions: Trade
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2/22/10 Democratic Institutions Elections Mayer – Direct Democracy Representative government need money to get elected lobbies need to adopt policies that are popular election Policymakers trade off losses of votes
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2/22/10 Grossman and Helpman: Protection for Sale Government sells policy for money Money buys support and helps win elections But to get money, must cater to special interests Government has to balance these competing concerns.
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2/22/10 Protection for Sale Three steps: (1) economic structure, (2) political structure, (3) equilibrium tariffs.
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2/22/10 Protection for Sale: Economy N goods Each individual owns a unit of labor Some individuals also own some specific factor The number of people who own factor i is The total number of people who own some specific factor is Picture 3 Picture 4
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