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

  • IN SONG KIM (a1)
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.

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Copyright
Corresponding author
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/.
Footnotes
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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.
Footnotes
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