The structure of protection across sectors has been interpreted as the result of competition among lobbies to influence politicians, but lobbies have been treated as unitary decision makers and little attention has been devoted to the importance of individual firms in this process. This paper builds a model where individual firms determine the amount of resources to allocate to political contributions and shows that, in the presence of a fixed cost of channeling political contributions, it is efficient for a lobby to be formed by the largest firms in a sector. Therefore the size distribution of firms plays an important role: sectors with a higher share of firms above a given size exhibit higher intensity of political activity. This prediction is borne out by the data: industries characterized by higher firm size dispersion obtain a higher level of protection. The model is also tested against the leading "Protection for Sale" paradigm, employing a newly matched data set on firm-level political contributions. The empirical evidence shows that, accounting for individual firm behavior, the model explains a larger fraction of the variation of protection across sectors.

[go to paper]

This paper investigates the relationship between the size of interest groups in terms of voter representation and the interest group’s campaign contributions to politicians. We uncover a robust hump-shaped relationship between the voting share of an interest group and its contributions to a legislator. This pattern is rationalized in a simultaneous bilateral bargaining model where the larger size of an interest group affects the amount of surplus to be split with the politician (thereby increasing contributions), but is also correlated with the strength of direct voter support the group can offer instead of monetary funds (thereby decreasing contributions). The model yields simple structural equations that we estimate at the district level employing data on individual and PAC donations and local employment by sector. This procedure yields estimates of electoral uncertainty and politicians effectiveness as perceived by the interest groups. Our approach also implicitly delivers a novel method for estimating the impact of campaign spending on election outcomes: we find that an additional vote costs a politician on average 145 dollars.

[go to paper]

This paper develops and empirically examines a model of relative productivity differences both within and across industries for small open economies. We decompose the effect of industry productivity on export performance into direct effect of own firm productivity and an indirect effect of higher peer firm productivity. In a sample of Chilean and Colombian plants, we find evidence of both a positive direct effect and a negative indirect effect. The empirical evidence supports our theoretical prediction that industry-specific factors of production and asymmetric substitutability between domestic and foreign varieties drive the negative indirect effect.

[go to paper] [go to technical appendix]

This paper employs a novel data set on lobbying expenditures to measure the degree of within-sector political organization and to explore the determinants of the mode of lobbying and political organization across U.S. industries. The data show that sectors characterized by a higher degree of competition tend to lobby more together (through a sector-wide trade association), while sectors with higher concentration and more differentiated products lobby more individually. The paper proposes a theoretical model to interpret the empirical evidence. In an oligopolistic market, firms can benefit from an increase in their product-specific protection measure, if they can raise prices and profits. They find it less profitable to do so in a competitive market where attempts to raise prices are more likely to reduce profits. In competitive markets firms are therefore more likely to lobby together, thereby simultaneously raising tariffs on all products in the sector.

[go to paper]

Is skill dispersion a source of comparative advantage? In this paper we use microdata from the International Adult Literacy Survey to show that the effect of skill dispersion on trade flows is quantitatively similar to that of the aggregate endowment of human capital. In particular we investigate, and find support for, the hypothesis that countries with a more dispersed skill distribution specialize in industries characterized by lower complementarity of workers’ skills. The result is robust to the introduction of controls for alternative sources of comparative advantage, as well as to alternative measures of industry-level skill complementarity.

[go to paper]

We employ a novel data set to estimate a structural econometric model of the decisions under risk of players in a game show where lotteries present payoffs in excess of half a million dollars. Differently from previous studies in the literature, the decisions under risk of the players in presence of large payoffs allow to estimate the parameters of the curvature of the vN-M utility function not only locally but also globally. Our estimates of relative risk aversion indicate that a constant relative risk aversion parameter of about one captures the average of the sample population. In addition we find that individuals are practically risk neutral at small stakes and risk averse at large stakes, a necessary condition, according to Rabin (2000) calibration theorem, for expected utility to provide a unified account of individuals’ attitude towards risk. Finally, we show that for lotteries characterized by substantial stakes non-expected utility theories fit the data equally well as expected utility theory.

[go to paper]

This paper develops a tractable multi-country, multi-sector model of international trade with unobservable skills and search frictions in the labour market. Comparative advantage derives from (i) cross-sectoral differences in the substitutability of workers’ skills and (ii) cross-country differences in the dispersion of skills in the working population. We establish the conditions under which higher skill dispersion triggers specialization in sectors characterized by higher substitutability of skills across workers.

[go to paper]

Do lobbyists provide issue-specific information to congressmen? Or do they provide special interests access to politicians? We present evidence to assess the role of issue expertise versus connections in the lobbying process and illustrate how both are at work. In support of the connections view, we show that lobbyists follow politicians they were initially connected to, when those politicians switch to new committee assignments. In support of the expertise view, we show that there is a group of specialists that even politicians of opposite political affiliation listen to. However, we find a more consistent monetary premium for connections than expertise.

[go to paper]

This paper documents a novel fact about the hiring decisions of exporting firms versus non-exporting firms in a French matched employer-employee dataset. We construct the type of each worker using both a traditional wage regression and a theory-based approach and compute measures of the average worker type and worker type dispersion at the firm level. We find that exporting firms feature a lower type dispersion in the pool of workers they hire. This effect is quantitatively larger than the common finding in the literature that exporters pay higher wages because, among other factors, they employ better workers. The matching between exporting firms and workers is even tighter in sectors characterized by better exporting opportunities as measured by foreign demand or tariff
shocks. Our findings are consistent with a model of matching between heterogeneous workers and firms in which variation in the worker type at the firm level exists in equilibrium only because of the presence of search costs. When
firms gain access to the foreign market, matching with the right worker becomes particularly
important because deviations from the ideal match quickly reduce the higher potential value
of the relationship. Hence, exporting firms select sets of workers that are
less dispersed relative to the average.
This analysis is suggestive of the presence of additional gains from trade due to improved sorting.
[go to paper]

Politicians and regulators rely on feedback from the public when setting policies. For-profit corporations and non-profit entities are active in this process and are arguably expected to provide independent viewpoints. Policymakers (and the public at large), however, may be unaware of the financial ties between some firms and non-profits – ties that are legal and tax-exempt, but difficult to trace. We identify these ties using IRS forms submitted by the charitable arms of large U.S. corporations, which list all grants awarded to non-profits. We document three patterns in a comprehensive sample of public commentary made by firms and non-profits within U.S. federal rulemaking between 2003 and 2015. First, we show that, shortly after a firm donates to a non-profit, the grantee is more likely to comment on rules for which the firm has also provided a comment. Second, when a firm comments on a rule, the comments by non-profits that recently received grants from the firm's foundation are systematically closer in content similarity to the firm's own comments than to those submitted by other non-profits commenting on that rule. Third, when a firm comments on a new rule, the discussion of the final rule is more similar to the firm's comments when the firm's recent grantees also comment on that rule. These patterns, taken together, suggest that corporations strategically deploy charitable grants to induce non-profit grantees to make comments that favor their benefactors, and that this translates into regulatory discussion that is closer to the firm's own comments.

[go to paper]

We explore the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For foundations associated with Fortune 500 and S&P500 corporations, we show that grants given to charitable organizations located in a congressional district increase when its representative obtains seats in committees that are of policy relevance to the firm associated with the foundation, a pattern which parallels that of Political Action Committee (PAC) spending. We additionally show that charities directly linked to politicians in personal financial disclosure forms exhibit similar patterns of political dependence. Our analysis suggests that firms deploy their charitable foundations as a form of tax exempt influence-seeking. The scale of charitable giving by large U.S. corporations is such that this channel of influence is economically substantial: our estimates suggest it may be larger than PAC contributions and federal lobbying combined. Given the lack of formal electoral disclosure requirements, charitable giving may further be a form of political influence that goes mostly undetected by voters and is subsidized by taxpayers.

[go to paper]

Did the rapid expansion of Chinese exports between 1990 and 2010 contribute to the country's worsening environmental quality? We exploit variation in the local industrial composition to gauge the effect on pollution and health outcomes of export expansion due to the decline in tariffs faced by Chinese exporters. We construct two export shocks at the prefecture level: (i) PollutionExportShock represents the pollution content of export expansion; (ii) ExportShock measures export expansion in dollars per worker. The two measures differ because prefectures specialize in different products: while two prefectures may experience the same shock in dollar terms, the one specializing in “dirty” industries has a larger PollutionExportShock. We find that the pollution content of exports affects pollution and mortality. A one standard deviation increase in PollutionExportShockincreases infant mortality by 2.7 deaths per thousand live births, which is about 18% of the standard deviation of infant mortality change during the period. The dollar value of export expansion reduces mortality by 0.7 deaths, but the effect is not statistically significant. We show that the channel through which exports affect mortality is pollution concentration. We find a negative, but insignificant effect on pollution of the dollar-value export shocks, a potential “technique” effect whereby higher income drives demand for clean environment. We find that only infant mortality related to cardio-respiratory conditions responds to exports shocks, while deaths due to accidents and other causes are not affected.

[go to paper]

This paper examines the relationship between a manufacturing firm's import behaviour and its performance. The focus is on two aspects of imports, input variety and the dynamics of import relationships. Firms importing more products from a larger set of suppliers tend to be larger, more productive and more successful in export markets. Not only the number, but also the duration of supply relationships matter. Firms maintaining a higher share of continuous supply relationships also benefit from size and productivity effects. These results suggest that the breath and depth of the import network are relevant factors for the performance of Canadian manufacturers. An unexpected result for a control variable merits further investigation. Namely, we find that more extensive use of Chinese suppliers is associated with inferior export performance. Our breadth and depth results underscore the importance of trade liberalization with new partners and trade facilitation with our established sources of suppliers.

[go to paper]

We explore the robustness of the hypothesis, first put forward by Grossman and Maggi (2000) (GM), that countries with higher skill dispersion specialize in the sector characterized by a submodular production function, i.e. the industry that cross-matches workers of different skills (henceforth referred to as SDC hypothesis). We relax the assumption of constant returns to skill, breaking the link between submodularity and the concavity of isoquants, a key feature in GM. We show that when a submodular sector displays convex isoquants, it no longer benefits from higher skill dispersion and higher skill dispersion countries may specialize in the supermodular sector. We investigate this theoretical possibility by performing a variety of simulations, based on empirical skill distributions, and find that in the vast majority of cases the SDC hypothesis is not violated.

[go to paper]

This paper presents a model and an automated methodology for assessing gains from network distortions in cities. Distortions arise from excluding traffic along certain routes. Distortions degrade network connectivity, but can be paradoxically useful for congestion amelioration. We show that such distortions are quantitatively large,increasingly pervasive in larger cities, and potentially very valuable. The results ultimately support the view that Braessí(1968) paradox is not just a theoretically interesting possibility, but a widespread feature of city road networks.

[go to paper]