Trade theorists continue to puzzle over their surprisingly small estimates of the impact of trade liberalization o n imports. All explanations of the puzzle treat trade liberalization as a given but the level of trade protection is not exogenous. The theo ry of endogenous protection predicts that higher levels of import penetration will lead to greater protection. This paper finds that, when trade protection is modeled endogenously, its restrictive impact on imports is large--ten times the size obtained from treating protection exogenously.
No takes yet. Share an insight, caveat, or question.
Daniel Trefler (1993) studied this question.