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Globalization for Sale

Author

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  • Michael Blanga Gubbay
  • Paola Conconi
  • Mathieu Parenti

Abstract

We study the role of firms in the political economy of trade agreements. Using detailed information from lobbying reports filed under the Lobbying Disclosure Act, we find that virtually all firms that lobby on free trade agreements (FTAs) support their ratification. Moreover, relative to non-lobbying firms, lobbying firms are larger, and more likely to be engaged in international trade and to operate in comparative advantage sectors. To rationalize these findings, we develop a model in which heterogeneous firms decide whether to lobby and how much to spend in favor or against a proposed FTA. We show that the distributional effects are asymmetric: the winners from the FTA have higher stakes in the agreement than the losers, which explains why only pro-FTA firms select into lobbying. The model also delivers predictions on the intensive margin of lobbying. In line with these predictions, we find that firms spend more supporting agreements that generate larger potential gains in terms of the extent of the reduction of tariffs on their final goods and intermediate inputs, the depth of the agreement, and the export and sourcing potential of the FTA partners and when politicians are less likely to be in favor of ratification.

Suggested Citation

  • Michael Blanga Gubbay & Paola Conconi & Mathieu Parenti, 2020. "Globalization for Sale," Working Papers ECARES 2020-08, ULB -- Universite Libre de Bruxelles.
  • Handle: RePEc:eca:wpaper:2013/304059
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    References listed on IDEAS

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    Cited by:

    1. Ross Jestrab, 2021. "The effects of domestic labour mobility on trade agreements: Empirical evidence," The World Economy, Wiley Blackwell, vol. 44(8), pages 2238-2283, August.
    2. Sonali Chowdhry & Gabriel J. Felbermayr, 2021. "Trade Liberalization along the Firm Size Distribution: The Case of the EU-South Korea FTA," CESifo Working Paper Series 8951, CESifo.
    3. Jianxing Lyu & Sören Prehn & Yanjie Zhang & Thomas Glauben & Yinchu Zeng, 2021. "Trade creation, political sensitivity and product exclusions: the political economy of agriculture protection in China’s FTAs," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 65(3), pages 627-657, July.
    4. Martin Braml, 2020. "Beggar-thy-Neighbor or Favor thy Industry? An Empirical Review of Transatlantic Tariff Retaliation," ifo Working Paper Series 326, ifo Institute - Leibniz Institute for Economic Research at the University of Munich.
    5. Rebeyrol, Vincent, 2020. "Protection without Discrimination," TSE Working Papers 20-1131, Toulouse School of Economics (TSE).

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    More about this item

    Keywords

    Trade agreements; endogeneous lobbying; heterogeneous firms;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations
    • F61 - International Economics - - Economic Impacts of Globalization - - - Microeconomic Impacts

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