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Lobbying costs and trade policy

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  • Tovar, Patricia

Abstract

We study how endogenous lobbying costs influence trade policies. Although in practice lobbying expenditures far exceed campaign contributions, the literature on the political economy of trade policy has focused on the latter. In this paper we develop a model in which informational lobbying costs play a role in determining the structure of protection. In the model, special interest groups can choose to send a signal to the policymaker regarding some information they possess, and the policymaker observes the signal before setting the trade policies. We find that lobbying expenditures directly affect the equilibrium policies. In order to test the predictions of the model we collected data on lobbying expenditures from the Center for Responsible Politics as well as data on trade and industry characteristic variables for the United States from other sources. We perform a structural estimation of the equilibrium trade policies and find support for our model. The empirical evidence indicates that lobbying expenditures play an important role in explaining the variation of protection across sectors. Moreover, the model leads to considerably lower and more reasonable estimates of the weight that the government places on social welfare relative to political contributions.

Suggested Citation

  • Tovar, Patricia, 2011. "Lobbying costs and trade policy," Journal of International Economics, Elsevier, vol. 83(2), pages 126-136, March.
  • Handle: RePEc:eee:inecon:v:83:y:2011:i:2:p:126-136
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Martin Gregor, 2011. "Corporate lobbying: A review of the recent literature," Working Papers IES 2011/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Nov 2011.
    2. Lima, Rafael Costa & Moreira, Humberto, 2014. "Information transmission and inefficient lobbying," Games and Economic Behavior, Elsevier, vol. 86(C), pages 282-307.
    3. Shih-shen Chen & Chu-Chuan Hsu & Chin-shu Huang, 2013. "Lobbying, corruption and “optimal” tariff," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 60(4), pages 375-386, December.
    4. repec:kap:jeczfn:v:123:y:2018:i:1:d:10.1007_s00712-017-0547-3 is not listed on IDEAS
    5. Maggi, Giovanni, 2014. "International Trade Agreements," Handbook of International Economics, Elsevier.
    6. Arnaud Dellis & Mandar Oak, 2017. "Subpoena Power and Information Transmission," School of Economics Working Papers 2017-05, University of Adelaide, School of Economics.

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