The latest resurgence in the U.S. of policies aimed at reducing imports and bolstering domestic production has included the expansion of Buy American provisions. While some of these are new and untested, in this paper we evaluate long-standing procurement limitations on the purchase of foreign products by the U.S. Federal Government. We use procurement micro-data to first map and detect employment effects of government purchases and then calibrate a quantitative trade model adapted to include features relevant to Buy American: a government sector, policy barriers in final and intermediate goods, labor force participation, and external economies of scale. We show that, while current Buy American provisions on final goods purchase have created up to 100,000 jobs at a cost of between $111,500 and $137,700 per job, the recently announced tightening of the policy on the use of foreign inputs will create fewer jobs at a higher cost of $154,000 to $237,800 per job. We also find scant evidence of the use of Buy American rules as an effective industrial policy.

We examine how the rise of institutional ownership has influenced firms’ political activities. We find that after the acquisition of a large stake, a firm’s political action committee (PAC) giving mirrors more closely that of the acquiring investor. Consistent with a causal interpretation, this pattern is also observed for acquisitions driven by new index inclusions. The pattern is stronger when firms’ management faces a shareholder proposal vote and may thus need the investor’s support. We further show that firms’ giving shifts away from businessrelevant politicians and is also strongly aligned with the individual campaign donations of the institutional investors’ employees. These results, together with the finding that the effects are larger for more “partisan” as well as privately owned investors, suggest that influence is driven by institutional investors’ own political views, rather than a profit-maximizing strategy.

This article discusses recent methodological innovations in the area of cost and benefit assessment of government regulation, in both a prospective and retrospective sense. Much of the extant progress is presented on the front of private costs of compliance. Private benefits, social costs, and social benefits remain much less systematically organized and more arduous to quantitatively assess, mostly due to the difficulty of standardizing partial and general equilibrium counterfactuals. We offer a discussion of potential future methodological improvements in cost-benefit analysis.

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.

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.

In the two decades straddling China's WTO accession, the China Shock, i.e. the rapid trade integration of China in the early 2000's, has had a profound economic impact across U.S. regions. It is now both an internationally litigated issue and the casus belli for a global trade war. Were its consequences unexpected? Did U.S. politicians have imperfect information about the extent of China Shock's repercussions in their district at the time when they voted on China's Normal Trade Relations status? Or did they have accurate expectations, yet placed a relatively low weight on the subconstituencies that ended up being adversely affected? Information sets, expectations, and preferences of politicians are fundamental, but unobserved determinants of their policy choices. We apply a moment inequality approach designed to deliver unbiased estimates under weak informational assumptions on the information sets of members of Congress. This methodology offers a robust way to test hypotheses about the expectations of politicians at the time of their vote. Employing repeated roll call votes in the U.S. House of Representatives on China's Normal Trade Relations status, we formally test what information politicians had at the time of their decision and consistently estimate the weights that constituent interests, ideology, and other factors had in congressional votes. We show how assuming perfect foresight of the shocks biases the role of constituent interests and how standard proxies to modeling politician's expectations bias the estimation. We cannot reject that politicians could predict the initial China Shock in the early 1990's, but not around 2000, when China started entering new sectors, and find a moderate role of constituent interests, compared to ideology. Overall, U.S. legislators appear to have had accurate information on the China Shock, but did not place substantial weight on its adverse consequences.

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 further away from the technological frontier. We discuss theo- retical mechanisms driving lobbying behind the technological frontier: not only the cost-benefit trade-off between innovation and lobbying is relatively less appealing for lower productivity firms, but the collective action ability of low productivity firms improves after a competitive shock.

Information is central to designing effective policy and policymakers often rely on competing interests to separate useful from biased information. In this paper we show how this logic of virtuous competition can break down, using a new and comprehensive dataset on U.S. federal regulatory rulemaking for 2003-2016. For-profit corporations and non-profit entities are active in the rule-making process and are arguably expected to provide independent viewpoints. Policymakers, however, may be less than fully aware of the financial ties between some firms and non-profits – grants that are legal and tax-exempt, but hard to trace. We document three patterns which suggest that these grants may distort policy. First, we show that, shortly after a firm donates to a non-profit, that non-profit is more likely to comment on rules on which the firm has also commented. 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 to the firm’s own comments, relative to comments submitted by other non-profits. Third, the final rule’s discussion by a regulator is more similar to the firm’s comments on that rule when the firm’s recent grantees also commented on it. We discuss two interpretations of the evidence. While the negative welfare consequences of a “comments-for-sale” scenario are immediate, we show that, even if corporate grants’ only effect is to relax the grantee’s budget constraint, this can also lead to distorted policy making.

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.

This paper offers a review of the recent empirical literature on lobbying within Political Economy. In surveying extant evidence, we emphasize quid-pro-quo and informational issues in special interest politics and we highlight crucial open research questions in both. The main unresolved methodological issues remain how to properly account for the impact of lobbying on which equilibrium policies are chosen and advanced, and on how distorted those equilibrium policies might be relative to the interests of the general public. Of the principal open questions within political economy, a comprehensive quantitative assessment of the welfare distortions of lobbying remains one of the most elusive.

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.

We analyze the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For philanthropic 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 on committees that are of policy relevance to the firm associated with the foundation. This pattern parallels that of publicly disclosed Political Action Committee (PAC) spending. As further evidence on firms’ political motivations for charitable giving, we show that a member of Congress’s departure is associated with a short-term decline in charitable giving to his district, and we again observe similar patterns in PAC spending. Charities directly linked to politicians through personal financial disclosure forms filed in accordance with Ethics in Government Act requirements similarly exhibit patterns that are consistent with political dependence. Our analysis suggests that firms may deploy their charitable foundations as a form of tax-exempt influence seeking. Based on a stylized model of political influence, our most conservative estimates imply that around 7 percent of total U.S. corporate charitable giving can be interpreted as politically motivated, an amount that is economically significant: it is 2.5 times larger than annual PAC contributions and about 36 percent of total federal lobbying expenditures. Given the lack of formal electoral or regulatory disclosure requirements, charitable giving may be a form of political influence that goes mostly undetected by voters and shareholders, and which is subsidized by taxpayers.

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.

Do lobbyists provide issue-specific information to members of Congress? Or do they provide special interests access to politicians? We present evidence to assess the role of issue expertise versus connections in the US Federal 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 experts that even politicians of opposite political affiliation listen to. However, we find a more consistent monetary premium for connections than expertise.

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.

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.

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.

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.

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-specific factors of production and asymmetric substitutability between domestic and foreign varieties drive the negative indirect effect.

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.

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.