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Lobbying for Trade Liberalization and its Policy Influence

Author

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  • Yuting Gao

    (Indiana University, Department of Economics)

Abstract

Lobbying activities are important to the promotion of Free Trade Agreements (FTAs). I quantify the influence of lobbying on ratification probability of FTA by constructing a novel dataset containing all lobbying activities about FTAs in the United States. I setup a contest model of lobbying where heterogeneous players choose lobbying expenditures to affect the ratification probability of FTAs. I use structural gravity estimation to predict the trade profit gains from FTAs and use Maximum Likelihood estimation to back out the ratification probabilities. Results show that lobbying expenditures in manufacturing sector increase ratification probability by 21 percentage points on average, and the expected gains from lobbying are five times of the lobbying expenditures on average. Additionally, free riding lowers lobbying expenditures by 40%. These findings highlight the effects of lobbying on the formation of international agreements.

Suggested Citation

  • Yuting Gao, 2022. "Lobbying for Trade Liberalization and its Policy Influence," CAEPR Working Papers 2022-006 Classification-D, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    • Handle: RePEc:inu:caeprp:2022006
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    Keywords

    lobbying; free trade agreement; trade liberalization; contest model;
    All these keywords.

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