Globalization For Sale

Economics

Speaker:Paola Conconi , Free University of Brussels
Website: http://conconi.ulb.be/BCP.pdf
Date: Friday 4 May 2018
Time: 3.30pm
Location: Matrix Lecture Theatre, Building One

Further details

We study the political economy of trade agreements with heterogeneous firms. We first uncover new facts about firms lobbying on free trade agreements (FTAs), using detailed information from lobbying reports filed under the Lobbying Disclosure Act of 1995. We find that individual firms always lobby in favor of the ratification of FTAs. Moreover, lobbying firms are larger and more likely to be engaged in trade than non-lobbying firms. Finally, lobbying expenditures increase in firm size and in the importance of the FTA. To rationalize these findings, we develop a model in which small and large firms coexist and study their decision to lobby in favor or against a proposed FTA, when there is some uncertainty about politicians’ stance on the agreement. We show that small firms are inconsequential and thus never lobby. By contrast, large firms can shape both market and political outcomes. They always lobby in favor of the FTA — and their lobbying expenditures are proportional to how much they stand to gain from the agreement.