Large Economic Shocks, The Protectionist Pressure and Hysteresis
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It is widely understood that severe domestic recessions and hard international economic environments are frequently accompanied by intense pressure of protectionist groups. However, existing positive analyses do not always agree on the extent to which the economic environment has influences on the efforts exerted by interest groups. This paper provides an explanation of why this may happen. In the hysteresis band of exogenous variables, firms do not change current positions, which means changes in the external environment may not immediately induce firms go act. Therefore microeconomic variables can be seen as insignificant factors when macroeconomic variables are. Moreover, under certain conditions on initiating and maintaining lobby costs, the hysteresis band can expand hence making the current policy regime more persistent. Regarding future empirical tests on the implications provided by this model, it is suggested to use the extent of the deviation from normality as explanatory variables of in firms' decision making.
Abstract
It is widely understood that severe domestic recessions and hard international economic environments are frequently accompanied by intense pressure of protectionist groups. However, existing positive analyses do not always agree on the extent to which the economic environment has influences on the efforts exerted by interest groups. This paper provides an explanation of why this may happen. In the hysteresis band of exogenous variables, firms do not change current positions, which means changes in the external environment may not immediately induce firms go act. Therefore microeconomic variables can be seen as insignificant factors when macroeconomic variables are. Moreover, under certain conditions on initiating and maintaining lobby costs, the hysteresis band can expand hence making the current policy regime more persistent. Regarding future empirical tests on the implications provided by this model, it is suggested to use the extent of the deviation from normality as explanatory variables of in firms' decision making.
참고문헌 (21)
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