The formation of non-tariff barriers: an integrated framework for empirical analysis (Q478021)

Summary: This paper examines an empirical model of the formation of non-tariff barriers, which accounts for several existing political-economic theories seeking to explain import protection. Results from formal Bayesian model comparison show that the integration of these theories is strongly supported by the data relative to alternatives models that only account for one theory at a time. Moreover, the results reveal the presence of multi-dimensional heterogeneity which is captured in a multivariate correlated random effects framework in which the intercept and the effect of employment on non-tariff protection are allowed to differ across industries. Furthermore, the impact of employment is correlated with the level of unionisation. The estimation results show that labour intensity, foreign barriers and import penetration have a significant impact in the determination of non-tariff protection.