This paper proposes a general empirical framework to estimate the protection-for-sale model, where the protection regime shifts according to a sector's market structure (perfectly or monop- olistically competitive). We base the protection structure on Grossman and Helpman (1994) for the subset of perfectly competitive sectors and on Chang (2005) for the subset of monop- olistically competitive sectors. The two protection regimes are simultaneously estimated with joint constraints. The results of the J-test consistently reject the homogeneous (perfect compe- tition) protection-for-sale model often adopted in previous literature and suggest a direction of improvement toward the proposed heterogeneous protection structure model.
Chang, Pao Li and Lee, Myoung-Jae.
Protection for Sale under Monopolistic Competition: An Empirical Investigation. (2006). Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/902
Creative Commons License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.