Lobbying as a Private Good with Intra-Industry Trade

Abstract

Intra-industry trade—trade in different varieties of the same product between countries with similar factor endowments—has been an important and surprising feature of the postwar international economy. Economists have explained this trade with models of monopolistic competition, which suggest that intra-industry trade does not have the stark distributional consequences that the more traditional “endowments-based” trade does. I do not dispute that claim here, although I do dispute a political implication drawn from it—that intra-industry trade produces less political action than endowments-based trade. I argue that, because firms involved in intra-industry trade are monopolists, lobbying essentially becomes a private good . If intra-industry trade places costs on firms, they do not have less incentive to take political action to stop it, as the conventional wisdom suggests. I provide evidence for this contention from complaints lodged with the International Trade Commission. The results show that the higher the degree of intra-industry trade the more likely an industry will request protection from the ITC.