Lobbying Behind the Frontier

Abstract

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. *Bombardini: University of California, Berkeley, Haas School of Business, NBER, and CEPR; Cutinelli-Rendina: Collège de France and Paris School of Economics; Trebbi: University of California, Berkeley, Haas School of Business, NBER, and CEPR. We would like to thank participants at The Economics of Creative Destruction, a festschrift symposium in honor of Philippe Aghion and Peter Howitt.