Political Influence of Firms in the Tradables and Non-Tradables Sectors: A Cross-Country Analysis

Abstract

Recent theoretical studies have shown that firms lobby government agencies to influence the structure of trade policies. This article empirically examines whether firms classified as either exporting or import‐competing (i.e. firms in the tradables sector) have differential levels of political influence relative to domestic firms that only produce non‐traded goods (i.e. firms in the non‐tradables sector). We use a rich firm‐level, cross‐sectional dataset from the World Business Environment Survey to achieve this objective. Results from the analysis reveal that exporting or import‐competing firms do have more political influence relative to domestic firms that neither export nor produce import‐competing goods. Market structure, firm age, firm size, government ownership, and dependence on public infrastructure also affect the extent of political influence that firms have.

Lobbying for Education in a Two‐Sector Model

“…Very recent empirical evidence, consistent with our result, is provided by Yasar et al (2011) focusing on tradables versus non-tradables sectors; using responses to the World Bank Group's World Business Environment Survey (WBES), they provide evidence that market power and size, among the others, are features of a firm positively related to the political influence it exerts. The importance of firms' size is also documented in Bennedsen et al (2011) and Chong and Gradstein (2010) using the same WBES dataset.…”

Optimal Endogenous Tariffs with Implicit Campaign Contributions

“…The positive relation between the size of the industry and its tariff was highlighted relatively early ( [17]). It's also present in Helpman [15], for whom the tariff is an increasing function of the volume of production of an industry (Helpman explains that a high production increases the stakes of protection) and it is also demonstrated by [18], specifying: "The positive firm size variable validates the notion that larger firms wield greater political influence because of their greater command over resources and more bargaining power with the government". This condition must not be mistaken for the one of the lobby's small size which concerns the number of specific factors owners, not the sector's output.…”

Collective Action Abroad: How Foreign Investors Organize Evidence from Foreign Business Associations in the Russian Federation

“…Similarly, state-owned firms seem likely to have better access to public officials than privately owned firms, and firms with many employees seem to be able to increase their bargaining power vis-à-vis the state by trading favourable legislation for support at the ballot box or keeping people employed (Frye 2002;Aisbett and McAusland 2013;Frye et al 2014). Firms in the tradables sector and those that export are also found to exercise stronger political influence (Yasar et al 2011;Yasar 2013), as are firms that observe that their competitors have influence on policy (Kanol 2015), whereas industry concentration does not seem to play a role (Barber et al 2014).…”