This week's presenter: Paola Conconi, Université Libre de Bruxelles
“Globalization for Sale” (with Michael Blanga-Gubbay and Mathieu Parenti) - download here
Abstract: We study the political economy of trade agreements with heterogeneous firms. 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) are in favor of their ratification. Moreover,lobbying firms are larger and more likely to be engaged in trade than non-lobbying firms. To rationalize these findings, we develop a theoretical model in which heterogeneous oligopolistic firms choose whether and how much to spend lobbying on the ratification of a proposed FTA,when they are uncertain about legislators’ stance on the agreement. We derive conditions under which the most productive firms select into lobbying and support FTAs, while less productive firms remain unorganized. The model delivers predictions about the intensive margin of lobbying. In line with these predictions, we find that i) larger firms spend more in support of FTAs, and ii) individual firms spend more on agreements that generate larger potential gains—in terms of reduction in the tariffs on their final goods and intermediate inputs, the depth of the agreement, and the export and sourcing potential of the FTA partners—and iii) when legislators are less likely be in favor of ratification.
All interested faculty and students are invited to attend. Co-sponsored by FAS and IQSS, the Program on Political Economy (PE) supports research-related activities that integrate the study of economics and politics, whether by studying economic behavior in the political process or political behavior in the marketplace. In general, positive political economy is concerned with showing how observed differences among institutions affect political and economic outcomes in various social, economic, and political systems and how the institutions themselves change and develop in response to individual and collective beliefs, preferences, and strategies.