Protection for Sale to Oligopolists

This paper modi\u85es Grossman and Helpmans canonical "Protection for Sale " model by allowing demand linkages and oligopolistic competition. It shows that increased sub-stitutability between products weakens interest groupsincentives to lobby. For the case of one organized and one unorganized industry, we obtain a particularly simple result: as product substitutability increases, the protection of the organized industrys product falls, whereas the protection of the unorganized sectors product increases. Empirical studies of the "Protection for Sale " model have suggested that the U.S. governments trade policy decisions are overwhelmingly determined by a concern for welfare maximization; the alternative interpretation of the paper is that the original model overstates the lobby groupsdesire for protection. I am grateful to Tore Ellingsen and Victor Polterovich for advice and encouragement. I also than