Protection for sale with imperfect rent capturing.

Abstract

Structurally estimating the Grossman and Helpman (1994) model using coverage ratios that include non-tariff barriers leads to biased parameter estimates. We develop a ``protection for sale'' theoretical framework consistent with the data, by explicitly allowing for non-tariff barriers. Introducing partial rent capturing we obtain a testable specification which finds support in the data. Our results suggest that average rent capturing is in the order of 72-75 percent.