Endogenous Trade Policy in the Presence of Lobbying and Heterogeneously Ignorant Voters
Tuesday, 24 February, 2015

On February 19th, ISET hosted Lasha Chochua from the University of Bielefeld. Mr. Chochua presented the preliminary version of his paper "Endogenous Trade Policy in the Presence of Lobbying and Heterogeneously Ignorant Voters" coauthored with George Papava from the University of Chicago. This was a very exceptional presentation as both Mr. Chochua and Mr. Papava are ISET graduates of the very first, Class 2008.

Before presenting his paper, Mr. Chochua shared his personal experience as an ISET graduate, stating that the two years that he spent here, were the best years of his life in terms of studying and gaining friends.

The paper Mr. Chochua presented explains why countries may deviate from free trade from the perspective of the positive political theory. The paper is based on the “Protection for Sale” approach of Grossman and Helpman. The authors develop a theoretical model in which organized groups provide political contributions to influence trade policy. In this model, the incumbent government cares about contributions, yet, at the same time, takes the reactions of voters into account. It is assumed that citizens have heterogeneous ignorance thresholds and explicitly derive the objective function of the policymaker. The main result is that free trade is obtained only if no group lobbies and ignorance levels are uniforms. In general, the lower density of ignorance of a group leads to lower (if any) protection of the same group from the government and, in addition, in equilibrium groups represented by lobbies are not always supported by the incumbent government.

ISET is happy to host its graduates and wishes them success in their Ph.D. careers.