Lobbying paradox of strategic export policy in a d

Authors: Teng Kun Wang

Publish Date: 2010/08/14

Volume: 8, Issue: 3, Pages: 323-336

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Abstract

This paper presents an analysis of lobbying based on imperfect competition by using threestage game It seeks to explain why lobbying efforts might be influenced by a home government’s viewpoint Endogenously determined lobbying may distort the outcomes of strategic export policy so that the results would differ from that generated by exogenously set lobbying The lobbying paradox results in the domestic firm being worse off than if it could credibly commit to not engage in lobbying Moreover in the presence of foreign firm lobbying the desired tax level is as the same as that of the benchmark case without lobbyingI am gratefully appreciating the two anonymous referees for helpful comments Their clarification is appropriate for this analysis The previous version of this paper was also corrected by Prof Leonard Wang for his helpful suggestions I also gratefully acknowledged financial support from the National Science Council in TaiwanWe see therefore that for the case of symmetric linear demands L t is negative ie the higher the announced tax the lower the lobbying effort This means that lobbying actually leads to higher effective tax rates making the home firm unambiguously worse off

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