DP16390 Lobbying Behind the Frontier

Author(s): Matilde Bombardini, Olimpia Cutinelli-Rendina, Francesco Trebbi
Publication Date: July 2021
Keyword(s): Lobbying, Schumpeterian Growth, Special Interest Politics
JEL(s): D72, P48
Programme Areas: Public Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=16390

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.