PUBLICATIONS & REPORTS

Contents Introduction

One of the most prominent models in political economy literature concerning trade policy is Grossman and Helpman's (1994) "Protection for Sale" model. Along with its great merits, however, this model has three unrealistic features. First, it essentially assumes that lobby groups exercise full agenda-setting power. Second, lobby groups are represented as offering an entire schedule of contributions for all possible trade policy options. Finally, the model neglects the actual legislative processes of trade policy. In the U.S., trade policy is initiated by the executive branch of government and subject to ratification by the legislative branch under fast-tract authority. This paper develops a delegation model to address these limitations of Grossman and Helpman's model by incorporating the possibility that lobbying behavior may be influenced by the behavior of policymakers and by incorporating the institutional feature of trade policy. The main question that I want to address with this model is that, considering the influence of policymakers on the lobbying behavior through agenda-setting power as well as the influence of lobby groups on the behavior of policymakers through political contributions, what kind of trade policy will be proposed by the executive branch of government? Also, this paper shows that when free trade is not politically feasible, legislative bodies capture all the surplus that the policy generates even when executive bodies devise trade policy. This may provide an answer to the question of why the U.S. Congress voluntarily delegated tariff-setting authority to the president.