Abstract
Purpose - This study theoretically analyzes how the level of political protection (tariff rate) is determined by political processes with conflicting interests and how it changes according to changes in global prices. Design/methodology/approach - For the purpose of the paper, against the backdrop of the apple market, which has recently become a major issue in our society due to the soaring price, we construct a mathematical model that assumes two pressure groups claiming pro-tariff and anti-tariff on the import of apples. Unlike data-based empirical studies, theoretical study has the advantage of generalization to expand related discussions and can derive policy implications from a new perspective. Findings - The analysis shows us that the equilibrium political tariff could rise or fall depending on the degree of risk aversion of the lobbyists. However, what has been clearly shown in our analysis is that domestic apple prices will fluctuate in the same direction as global prices. In other words, it is clear that even though there is a lobby for protection trade, when global prices fall, domestic prices also fall. This fact implies that apple-producing farms can decline even if tariffs on apples increase. Research implications or Originality - As long as the equilibrium political tariff rates are determined through competitive lobbying by interest groups, productive resource use is wasted from the perspective of society as a whole. Due to this waste, it can be inferred that the tariff rate determined endogenously by lobbying activities can lead to loss of welfare compared to the case of the tariff rate level, which is highly determined by the government's unilateral decision.