Strategic lobbying and taxation choice : a political economy of trade policy analysis
In this thesis, I use a political economy of trade policy approach to analyze the issues of strategic lobbying and taxation choice. The thesis contains 4 papers together with an introduction, literature review and conclusion. In Chapter 3, a lobbying-influence model is presented to discuss how the outcomes of trade policy is influenced by lobbying activities during the policymaking process. A comparison of the welfare-maximizing model and the lobbying-influence model under a game theory framework is undertaken. Chapter 4 provides a new explanation on the issue of asymmetric lobbying from the view point of the impact of external environment. Since the incentive of the domestic firm to engage in lobbying activities varies with its marginal costs, the outcomes of lobbying performance are different. This argument holds for both complete and incomplete information settings. Chapter 5 considers whether there is a positive role for lobbying activities in an incomplete information setting when the foreign entry is incorporated. The results suggest that the social welfare under the pooling equilibrium is higher than that under the separating equilibrium. As a result, there is no positive role for lobbying activities in this two-period model. Chapter 6 provides a political economy model to explain why trade taxes rather than more efficient income taxes might be adopted and what links the taxation choice and the economic development. In general, people prefers to pay less tax to the government. In a democratic society, a policy, which yields a higher utility to the majority of voters, is supported through majority voting. Therefore, the choice of taxation instruments depends on the tax payments, which are determined by the tax method, the income level, and the movement of income distribution over time.