Essays on Lobbying and Globalization

This dissertation consists of three essays in which I study the political economy of trade agreements. Using detailed information from lobbying reports filed under the Lobbying Disclosure Act, I systematically explore the role played by both the winners and the losers of globalization. The first chapter focuses on the winners, large multinational firms lobbying in favor of the ratification of free trade agreements. The second chapter looks at these winners when they lose, studying the impact of the non-ratification of a trade agreement on their profits. The last chapter focuses on labor interests and trade unions, the losers of globlalization.The first chapter (joint with Paola Conconi and Mathieu Parenti) is focused on firms. We show that the political economy of free trade agreements (FTAs) is dominated by large firms engaged in international trade that support the ratification of these agreements. We develop a model of endogenous lobbying on FTAs by heterogeneous firms, which can explain why only large pro-FTA firms select into lobbying. The model also delivers predictions on the intensive margin of lobbying. In line with these predictions, we find that larger firms spend more supporting a given FTA, and individual firms spend more supporting FTAs that generate larger gains – i.e. larger improvements in access to foreign consumers and suppliers and smaller increases in domestic competition – and that are more likely to be opposed by politicians.The second chapter (joint with Moritz Hennicke) is an event study on the 2016 U.S. presidential election, and the subsequent shock to U.S. trade policy – the non-ratification of the Trans-Pacific Partnership (TPP). We provide empirical evidence that corporate lobbying on trade agreements matters for corporate profits. We find that stock prices of companies that lobbied in favor of the TPP underperformed following Trump’s election. On the intensive margin, we find a strong and positive relationship between the amount spent in lobbying and the cumulative losses of lobbying firms. Finally, by comparing the original TPP agreement with its newer version (CPTPP), without U.S. participation, we provide evidence that firms’ lobbying activity was related to having some specific provisions included in the agreement. In the third chapter, I focus on the role played by trade unions, studying both their lobbying expenditures and their campaign contributions to politicians. I first show that unions are the main opposing force to the ratification of FTAs, and that larger unions, operating in tradable sectors, are more likely to lobby against FTAs. I then study union’s PAC contributions to political parties. During the last three decades, more than 90% of unions’ PAC contributions were directed to Democratic candidates. This has drastically changed when the Republican party took a more protectionist stance under Trump. I find that unions that lobbied against the ratification of FTAs started contributing more to Republican congressmen, particularly those who have taken an anti-trade stance.