Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/216635
Authors: 
Blanga-Gubbay, Michael
Conconi, Paola
Parenti, Mathieu
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8239
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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.
Subjects: 
trade agreements
endogeneous lobbying
heterogeneous firms
JEL: 
F13
F53
F61
Document Type: 
Working Paper

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