Working Paper: CEPR ID: DP16390
Authors: Matilde Bombardini; Olimpia Cutinellirendina; Francesco Trebbi
Abstract: This chapter investigates the non-market response of firms to international trade shocks increasing the level of competition in U.S. industries. Lobbying expenditures increase as a consequence of import changes related to the China shock. The effect on lobbying is not homogeneous across firms and it concentrates particularly in those producers which are behind the technological frontier. We discuss theoretical mechanisms driving lobbying of firms away from the technological frontier: not only the cost-benefit trade-off between innovation and lobbying is relatively less appealing for low productivity firms, but the collective action ability of low productivity firms improves after a competitive shock.
Keywords: lobbying; Schumpeterian growth; special interest politics
JEL Codes: D72; P48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased lobbying expenditures among U.S. firms (L49) | Improved collective action ability of low productivity firms (J54) |
| Cost of innovation becomes less appealing (O39) | Increased lobbying instead of innovation (O39) |
| Increased import competition from China (F69) | Increased lobbying expenditures among U.S. firms (L49) |
| Increased import competition from China (F69) | Firms behind the technological frontier increase lobbying expenditures (O31) |
| Lower productivity firms (D22) | Increased lobbying expenditures in response to competition (L49) |