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Competition and political organization: Together or alone in lobbying for trade policy?

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  • Bombardini, Matilde
  • Trebbi, Francesco

Abstract

This paper employs a novel data set on lobbying expenditures to measure the degree of within-sector political organization and to explore the determinants of the mode of lobbying and political organization across U.S. industries. The data show that sectors characterized by a higher degree of competition tend to lobby more together (through a sector-wide trade association), while sectors with higher concentration and more differentiated products lobby more individually. The paper proposes a theoretical model to interpret the empirical evidence. In an oligopolistic market, firms can benefit from an increase in their product-specific protection measure, if they can raise prices and profits. They find it less profitable to do so in a competitive market where attempts to raise prices are more likely to reduce profits. In competitive markets firms are therefore more likely to lobby together, thereby simultaneously raising tariffs on all products in the sector.

Suggested Citation

  • Bombardini, Matilde & Trebbi, Francesco, 2012. "Competition and political organization: Together or alone in lobbying for trade policy?," Journal of International Economics, Elsevier, vol. 87(1), pages 18-26.
  • Handle: RePEc:eee:inecon:v:87:y:2012:i:1:p:18-26 DOI: 10.1016/j.jinteco.2011.11.011
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    Cited by:

    1. Mian, Atif & Sufi, Amir & Trebbi, Francesco, 2013. "The Political Economy of the Subprime Mortgage Credit Expansion," Quarterly Journal of Political Science, now publishers, vol. 8(4), pages 373-408, October.
    2. Lastauskas, Povilas, 2013. "Europe's revolving doors: Import competition and endogenous firm entry institutions," Kiel Advanced Studies Working Papers 464, Kiel Institute for the World Economy (IfW).
    3. Ma, Guangrong & Rui, Oliver Meng & Wu, Yiping, 2015. "A springboard into politics: Do Chinese entrepreneurs benefit from joining the government-controlled business associations?," China Economic Review, Elsevier, vol. 36(C), pages 166-183.
    4. Prachi Mishra & Rodney D. Ludema & Anna Maria Mayda, 2010. "Protection for Free? the Political Economy of U.S. Tariff suspensions," IMF Working Papers 10/211, International Monetary Fund.
    5. Atif Mian & Amir Sufi & Francesco Trebbi, 2010. "The Political Economy of the US Mortgage Default Crisis," American Economic Review, American Economic Association, vol. 100(5), pages 1967-1998, December.
    6. Jennifer Abel-Koch, 2013. "Endogenous Trade Policy with Heterogeneous Firms," Working Papers 1306, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz, revised 01 Aug 2013.
    7. repec:eee:corfin:v:44:y:2017:i:c:p:233-254 is not listed on IDEAS
    8. Zudenkova Galina, 2017. "Lobbying as a Guard against Extremism," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 17(1), pages 1-17, February.
    9. William R. Kerr & William F. Lincoln & Prachi Mishra, 2014. "The Dynamics of Firm Lobbying," American Economic Journal: Economic Policy, American Economic Association, pages 343-379.
    10. Facchini, Giovanni & Mayda, Anna Maria & Mishra, Prachi, 2011. "Do interest groups affect US immigration policy?," Journal of International Economics, Elsevier, vol. 85(1), pages 114-128, September.
    11. Barber Benjamin & Weschle Simon & Pierskalla Jan, 2014. "Lobbying and the collective action problem: comparative evidence from enterprise surveys," Business and Politics, De Gruyter, vol. 16(2), pages 1-26, August.
    12. 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.
    13. Lake, James, 2015. "Revisiting the link between PAC contributions and lobbying expenditures," European Journal of Political Economy, Elsevier, vol. 37(C), pages 86-101.
    14. Bombardini, Matilde & Trebbi, Francesco, 2012. "Competition and political organization: Together or alone in lobbying for trade policy?," Journal of International Economics, Elsevier, pages 18-26.
    15. repec:kap:jeczfn:v:123:y:2018:i:1:d:10.1007_s00712-017-0547-3 is not listed on IDEAS
    16. Lake, James & Millimet, Daniel L., 2016. "An empirical analysis of trade-related redistribution and the political viability of free trade," Journal of International Economics, Elsevier, pages 156-178.
    17. James Hollyer, 2010. "Conditionality, compliance, and domestic interests: State capture and EU accession policy," The Review of International Organizations, Springer, vol. 5(4), pages 387-431, December.
    18. Gao, Meng & Huang, Jiekun, 2016. "Capitalizing on Capitol Hill: Informed trading by hedge fund managers," Journal of Financial Economics, Elsevier, vol. 121(3), pages 521-545.
    19. repec:bpj:buspol:v:18:y:2016:i:4:p:395-433:n:1 is not listed on IDEAS
    20. repec:smu:ecowpa:1405 is not listed on IDEAS
    21. Bombardini, Matilde & Trebbi, Francesco, 2012. "Competition and political organization: Together or alone in lobbying for trade policy?," Journal of International Economics, Elsevier, pages 18-26.
    22. John M. de Figueiredo & Brian Kelleher Richter, 2013. "Advancing the Empirical Research on Lobbying," NBER Working Papers 19698, National Bureau of Economic Research, Inc.
    23. Laura A. Wellman, 2017. "Mitigating political uncertainty," Review of Accounting Studies, Springer, vol. 22(1), pages 217-250, March.

    More about this item

    Keywords

    Lobby formation; Collective action; Product market competition;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • H0 - Public Economics - - General

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