US non-tariff barriers as privately provided public goods

The endogenous theory of protection is empirically investigated in a different light. Rather than emphasizing the determinants of the supply of protection, the present study empirically investigates the micro-level demand side behavior of firms. Predictions from Bergstrom et al. (Journal of Public Economics, 1986, 2, 25-49) about the private provision of public goods provide a theoretical foundation for such a demand-side econometric investigation. If rational lobbies are observed to behave in a manner consistent with the theory of the private provision of public goods, then it must be the case that they are able to influence trade policy. The econometric specification is also consistent with the special-interest models of Olson (The Logic of Collective Action: Public Goods and the Theory of Groups, Harvard University Press, 1965), Stigler (Bell Journal of Economics and Management Science, 1971, 2, 137-146), Baron (Quarterly Journal of Economics, 1989, 1, 45-72), and Grossman and Helpman (American Economic Review, 1994, 84, 833-850). Hence evidence presented in this study from the demand-side behavior of firms has the deeper implication that it validates the theory of endogenous protection, an issue that is still controversial among trade theorists.