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Title: Protectionism unchained: Determinants and consequences of discretionary trade policy in Argentina (with Atkin, Fajgelbaum, and Ospital)
Abstract: Many countries utilize discretionary trade policies—those that target particular firms at particular times. However, since these policies are illegal under WTO rules, our ability to study these episodes has been hampered. In this paper, we study the case of Argentina, a country that in the early 2010s implemented a set of discretionary trade policies that violated WTO. We identify firm and sectoral characteristics associated with higher protection and find that they are consistent with the government's rhetoric of encouraging domestic investment, promoting exports, and protecting domestic producers from import competition. Second, we identify the effects of import restrictions on import quantities and prices. We uncover a new link between high-frequency variation in macroeconomic conditions and the level and structure of trade protection that provides an instrument for quantity restrictions. Surprisingly, the policy backfired through higher import prices. A model of bargaining explains such a result when foreign producers have most of the bargaining power.
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