Hostname: page-component-cd9895bd7-mkpzs Total loading time: 0 Render date: 2024-12-20T13:44:25.320Z Has data issue: false hasContentIssue false
  • English
  • Français

Political Cleavages within Industry: Firm-level Lobbying for Trade Liberalization

Published online by Cambridge University Press:  24 February 2017

IN SONG KIM
IN SONG KIM*
Affiliation:
Massachusetts Institute of Technology
*
In Song Kim is Assistant Professor, Department of Political Science, Massachusetts Institute of Technology, Cambridge, MA, 02139 (insong@mit.edu), URL: http://web.mit.edu/insong/www/.
Get access Rights & Permissions [Opens in a new window]

Abstract

Existing political economy models explain the politics of trade policy using inter-industry differences. However, this article finds that much of the variation in U.S. applied tariff rates in fact arises within industry. I offer a theory of trade liberalization that explains how product differentiation in economic markets leads to firm-level lobbying in political markets. High levels of product differentiation eliminates the collective action problem faced by exporting firms while import-competing firms need not fear product substitution. To test this argument, I construct a new dataset on lobbying by all publicly traded manufacturing firms from reports filed under the Lobbying Disclosure Act of 1995. I find that productive exporting firms are more likely to lobby to reduce tariffs, especially when their products are sufficiently differentiated. I also find that highly differentiated products have lower tariff rates. The results challenge the common focus on industry-level lobbying for protection.

Type
Research Article
Information
American Political Science Review , Volume 111 , Issue 1 , February 2017 , pp. 1 - 20
Copyright
Copyright © American Political Science Association 2017 

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

Financial support from the National Science Foundation Doctoral Dissertation Research Improvement Grant SES-1264090 is acknowledged. I thank Christina Davis, Joanne Gowa, Kosuke Imai, Adam Meirowitz, Helen Milner, and Kris Ramsay for their valuable advice. I also thank Scott Abramson, Michael Barber, Graeme Blair, Alex Bolton, Jaquilyn Waddell Boie, Tom Christensen, Elisha Cohen, Ben Fifield, Gene Grossman, Raymond Hicks, Mike Higgins, Kentaro Hirose, Tobias Hofmann, Jeong-Ho (John) Kim, John Londregan, Lisa Camner McKay, Bethany Park, Marc Ratkovic, Steve Redding, Alex Ruder, Yuki Shiraito, David Andrew Singer, Brandon Stewart, Dustin Tingley, Carlos Velasco, and Meredith Wilf for their helpful comments. I thank seminar participants at Columbia University, Emory University, Harvard University, MIT, Princeton University, Stanford Graduate School of Business, and Vanderbilt University. The editor and the four anonymous reviewers provided helpful comments that have significantly improved this article.

References

REFERENCES

Ansolabehere, Stephen, Snyder, James M., and Tripathi, Micky. 2002. “Are PAC Contributions and Lobbying Linked? New Evidence from the 1995 Lobby Disclosure Act.” Business and Politics 4 (2): 131–55.Google Scholar
Baccini, Leonardo, Impullitti, Giammario, and Malesky, Edmund J.. 2015. “Globalization and State Capitalism: Assessing Vietnam’s Accession to the WTO.” Working paper available at http://www.freit.org/WorkingPapers/Papers/FirmLevelTrade/FREIT970.pdf.Google Scholar
Bagwell, Kyle, and Staiger, Robert W.. 1999. “An Economic Theory of GATT.” The American Economic Review 89 (1): 215–48.CrossRefGoogle Scholar
Bailey, Michael A., Goldstein, Judith, and Weingast, Barry R.. 1997. “The Institutional Roots of American Trade Policy: Politics, Coalitions, and International Trade.” World Politics 49 (3): 309–38.CrossRefGoogle Scholar
Baldwin, Robert E. 1985. The Political Economy of US Import Policy, Vol. 2. Cambridge, MA: MIT Press.Google Scholar
Bernard, Andrew B., Eaton, Jonathan, Jensen, J. Bradford, and Kortum, Samuel. 2003. “Plants and Productivity in International Trade.” The American Economic Review 93 (4): 1268–90.Google Scholar
Bernard, Andrew B., and Jensen, J. Bradford. 1999. “Exceptional Exporter Performance: Cause, Effect, or Both?” Journal of International Economics 47 (1): 1–25.Google Scholar
Bernard, Andrew B., and Jensen, J. Bradford. 2004. “Why Some Firms Export.” The Review of Economics and Statistics 86 (2): 561–69.CrossRefGoogle Scholar
Bernard, Andrew B., Jensen, J. Bradford, Redding, Stephen J., and Schott, Peter K.. 2007. “Firms in International Trade.” The Journal of Economic Perspectives 21 (3): 105–30.CrossRefGoogle Scholar
Bernard, Andrew B., Jensen, J. Bradford, and Schott, Peter K.. 2009. “Importers, Exporters, and Multinationals: A Portrait of Firms in the U.S. that Trade Goods.” In Producer Dynamics: New Evidence from Micro Data, edited by Dunne, Timothy., Jensen, J. Bradford, and Roberts, Mark J., Chicago: Chicago University Press 513–52.CrossRefGoogle Scholar
Bernheim, B. Douglas, and Whinston, Michael D.. 1986. “Menu Auctions, Resource Allocation, and Economic Influence.” The Quarterly Journal of Economics 101 (1): 1–31.CrossRefGoogle Scholar
Bertrand, Marianne, Bombardini, Matilde, and Trebbi, Francesco. 2014. “Is It Whom You Know or What You Know? An Empirical assessment of the Lobbying Process.” The American Economic Review 104 (12): 3885–920.Google Scholar
Bombardini, Matilde. 2008. “Firm Heterogeneity and Lobby Participation.” Journal of International Economics 75 (2): 329–48.CrossRefGoogle Scholar
Bombardini, Matilde, and Trebbi, Francesco. 2012. “Competition and Political Organization: Together or Alone in Lobbying for Trade Policy?” Journal of International Economics 87 (1): 18–26.Google Scholar
Bown, Chad P. 2012. Temporary Trade Barriers Database. Version 6 The World Bank. http://go.worldbank.org/W5AGKE6DH0 Google Scholar
Bradford, Jensen J., Quinn, Dennis P., and Weymouth, Stephen. 2015. “The Influence of Firm Global Supply Chains and Foreign Currency Undervaluations on US Trade Disputes.” International Organization 69 (4): 913–47.Google Scholar
Brander, James A., and Spencer, Barbara J.. 1985. “Export Subsidies and International Market Share Rivalry.” Journal of International Economics 18 (1–2): 83–100.CrossRefGoogle Scholar
Broda, Christian, and Weinstein, David E.. 2006. “Globalization and the Gains from Variety.” The Quarterly Journal of Economics 121 (2): 541–85.Google Scholar
Carnegie, Allison. 2015. Power Plays: How International Institutions Reshape Coercive Diplomacy. New York, NY: Cambridge University Press.CrossRefGoogle Scholar
Destler, I. M., and Odell, John. 1987. Anti-protection: Changing Forces in U.S. Trade Politics. Washington, DC: Institute for International Economics.Google Scholar
Eaton, Jonathan, and Grossman, Gene M.. 1986. “Optimal Trade and Industrial Policy under Oligopoly.” The Quarterly Journal of Economics 101 (2): 383–406.CrossRefGoogle Scholar
Eaton, Jonathan, Kortum, Samuel, and Kramarz, Francis. 2011. “An Anatomy of International Trade: Evidence From French Firms.” Econometrica 79 (5): 1453–98.Google Scholar
Gawande, Kishore, and Bandyopadhyay, Usree. 2000. “Is Protection for Sale? Evidence on the Grossman-Helpman Theory of Endogenous Protection.” The Review of Economics and Statistics 82 (1): 139–52.Google Scholar
Gilligan, Michael J. 1997a. Empowering Exporters: Reciprocity, Delegation, and Collective Action in American Trade Policy. Ann Arbor: University of Michigan Press.Google Scholar
Gilligan, Michael J. 1997b. “Lobbying as a Private Good with Intra-Industry Trade.” International Studies Quarterly 41 (3): 455–74.Google Scholar
Goldberg, Pinelopi Koujianou, and Maggi, Giovanni. 1999. “Protection for Sale: An Empirical Investigation.” The American Economic Review 89 (5): 1135–55.CrossRefGoogle Scholar
Goldstein, Judith, and Gulotty, Robert. 2014. “America and Trade Liberalization: The Limits of Institutional Reform.” International Organization 68 (2): 263–95.Google Scholar
Gowa, Joanne, and Kim, Soo Yeon. 2005. “An Exclusive Country Club: The Effects of the GATT on Trade, 1950–94.” World Politics 57 (4): 453–78.Google Scholar
Grossman, Gene M., and Helpman, Elhanan. 1994. “Protection for Sale.” The American Economic Review 84 (4): 833–50.Google Scholar
Hainmueller, Jens, and Hiscox, Michael J.. 2006. “Learning to Love Globalization: Education and Individual Attitudes Toward International Trade.” International Organization 60 (2): 469–98.CrossRefGoogle Scholar
Hansen, Wendy L., and Mitchell, Neil J.. 2000. “Disaggregating and Explaining Corporate Political Activity: Domestic and Foreign Corporations in National Politics.” The American Political Science Review 94 (4): 891–903.Google Scholar
Helpman, Elhanan, Itskhoki, Oleg, Muendler, Marc-Andreas, and Redding, Stephen J. 2012. “Trade and Inequality: From Theory to Estimation.” Technical report, National Bureau of Economic Research.Google Scholar
Helpman, Elhanan, Itskhoki, Oleg, and Redding, Stephen. 2010. “Inequality and Unemployment In a Global Economy.” Econometrica 78 (4): 1239–83.Google Scholar
Helpman, Elhanan, Melitz, Marc J., and Yeaple, Stephen R.. 2004. “Export versus FDI with Heterogeneous Firms.” The American Economic Review 94 (1): 300–16.CrossRefGoogle Scholar
Hillman, Arye L. 1982. “Declining Industries and Political-Support Protectionist Motives.” The American Economic Review 72 (5): 1180–7.Google Scholar
Hiscox, Michael J. 2002. “Commerce, Coalitions, and Factor Mobility: Evidence from Congressional Votes on Trade Legislation.” The American Political Science Review 96 (3): 593–608.CrossRefGoogle Scholar
Keohane, Robert O. 1984. After Hegemony: Cooperation and Discord in the World Political Economy. Princeton NJ: Princeton University Press.Google Scholar
Krugman, Paul. 1980. “Scale Economies, Product Differentiation, and the Pattern of Trade.” The American Economic Review 70 (5): 950–9.Google Scholar
Kuno, Arata, and Naoi, Megumi. 2015. “Framing Buisiness Interests: How Campaigns Affect Firms’ Positions on Preferential Trade Agreements.” Available at SSRN: http://ssrn.com/abstract=2671986.Google Scholar
Lü, Xiaobo, Scheve, Kenneth, and Slaughter, Matthew J.. 2012. “Inequity Aversion and the International Distribution of Trade Protection.” American Journal of Political Science 56 (3): 638–54.Google Scholar
Ludema, Rodney D., Mayda, Anna Maria, and Mishra, Prachi. 2010. Protection for Free?: The Political Economy of US Tariff Suspensions. London, United Kingdom: Centre for Economic Policy Research.Google Scholar
Magee, Stephen P., Brock, William A., and Young, Leslie. 1989. Black Hole Tariffs and Endogenous Policy Theory: Political Economy in General Equilibrium. Cambridge; New York: Cambridge University Press.Google Scholar
Maggi, Giovanni, and Rodríguez-Clare, Andrés. 2007. “A Political-Economy Theory of Trade Agreements.” The American Economic Review 97 (4): 1374–406.CrossRefGoogle Scholar
Mansfield, Edward D., and Mutz, Diana C.. 2009. “Support for Free Trade: Self-Interest, Sociotropic Politics, and Out-Group Anxiety.” International Organization 63 (3): 425–57.Google Scholar
Marvakov, Jordan, Becker, Randy A., and Gray, Wayne B.. 2000. “NBER- CES Manufacturing Industry Database.” http://www.nber.org/data/nberces5809.html Google Scholar
Mayer, Wolfgang. 1984. “Endogenous Tariff Formation.” The American Economic Review 74 (5): 970–85.Google Scholar
Melitz, Marc J. 2003. “The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity.” Econometrica 71 (6): 1695–725.Google Scholar
Melitz, Marc J., and Ottaviano, Gianmarco. 2008. “Market Size, Trade, and Productivity.” Review of Economic Studies 75: 295–316.Google Scholar
Milner, Helen. 1987. “Resisting the Protectionist Temptation: Industry and the Making of Trade Policy in France and the United States During the 1970s.” International Organization 41 (4): 639–65.Google Scholar
Milner, Helen V. 1988. Resisting Protectionism: Global Industries and the Politics of International Trade. Princeton, NJ: Princeton University Press.Google Scholar
Milner, Helen V., and Yoffie, David B.. 1989. “Between Free Trade and Protectionism: Strategic Trade Policy and a Theory of Corporate Trade Demands.” International Organization 43 (2): 239–72.Google Scholar
Olley, G. Steven, and Pakes, Ariel. 1996. “The Dynamics of Productivity in the Telecommunications Equipment Industry.” Econometrica 64 (6): 1263–97.Google Scholar
Olson, Mancur. 1971. The Logic of Collective Action: Public Goods and the Theory of Groups, Vol. 124. Cambridge, MA: Harvard University Press.Google Scholar
Osgood, Iain. 2016. “Differentiated Products, Divided Industries: Firm Preferences over Trade Liberalization.” Economics and Politics 28: 161–80.Google Scholar
Pinto, Pablo M., and Weymouth, Stephen. 2016. “Partisan Cycles in Offshore Outsourcing: Evidence from U.S. Imports.” Economics and Politics 28 (3): 233–61.Google Scholar
Rauch, James E. 1999. “Networks Versus Markets in International Trade.” Journal of International Economics 48 (1): 7–35.Google Scholar
Roberts, Molly, Stewart, Brandon, and Tingley, Dustin. 2016. stm: R Package for Structural Topic Models. R package version 1.1.3. http://www.structuraltopicmodel.com Google Scholar
Rogowski, Ronald. 1987. “Political Cleavages and Changing Exposure to Trade.” The American Political Science Review 81 (4): 1121–37.CrossRefGoogle Scholar
Schattschneider, Elmer Eric. 1935. Politics, Pressures and the Tariff: A Study of Free Private Enterprise in Pressure Politics, as Shown in the 1929–1930 Revision of the Tariff. Englewood Cliffs, NJ: Prentice-Hall.Google Scholar
Scheve, Kenneth F., and Slaughter, Matthew J.. 2001. “What Determines Individual Trade-Policy Preferences?” Journal of International Economics 54 (2): 267–92.Google Scholar
Tibshirani, Robert. 1996. “Regression Shrinkage and Selection via the LASSO.” Journal of the Royal Statistical Society. Series B (Methodological) 58 (1): 267–88.CrossRefGoogle Scholar
Trefler, Daniel. 1993. “Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy.” The Journal of Political Economy 101 (1): 138–60.CrossRefGoogle Scholar
Yaşar, Mahmut. 2013. “Political Influence of Exporting and Import-Competing Firms: Evidence from Eastern European and Central Asian Countries.” World Development 51: 154–68.Google Scholar
Supplementary material: PDF

Kim supplementary material

Web Appendix

Download Kim supplementary material(PDF)
PDF 910.4 KB
Submit a response

Comments

No Comments have been published for this article.