The Political Economy of Poland's Trade Policy: Empirical Verification of the Grossman-Helpman Model

Abstract

This paper analyzes rent-seeking behavior in trade policy based on the Grossman-Helpman (1994) framework. Our empirical implementation deals with Polish trade policy in the late 1990s. We use the instrumental variable approach to estimate the model, accounting for possible endogeneity of the regressors. Our results suggest that lobbies were important in the process of Polish trade policy formation in the period under consideration. The degree of the lobbies' influence is, however, significantly lower than in the case of the United States. The model seems to perform better for most-favored-nation cases than preferential tariffs. In the former case, our estimates are in line with the original theory.