Lobbying for Trade Liberalization and its Policy Influence

Lobbying activities are important to the promotion of Free Trade Agreements (FTAs). I quantify the influence of lobbying on ratification probability of FTAs by constructing a novel dataset containing all lobbying activities related to FTAs in the United States. I setup a contest model of lobbying where heterogeneous players choose lobbying expen- ditures to affect the ratification probability of FTAs. I use structural gravity estimation to predict the trade profit gains from FTAs and use Maximum Likelihood estimation to back out the ratification probabilities. Results suggest that lobbying in the manufactur- ing sector increased ratification probability by 12 percentage points on average, and the expected gains from lobbying are 2.5 times the lobbying expenditures on average. Addi- tionally, free riding lowers lobbying expenditures by 50%. These findings highlight the effects of lobbying on the formation of international agreements