This paper provides a theory of lobby formation within a framework in which trade policy is determined through political contributions. Under certain conditions, free trade turns out to be an equilibrium outcome either when the government has a high affinity for political contributions or when...

We provide evidence that increased political influence, arising from CIA interventions during the Cold War, was used to create a larger foreign market for American products. Following CIA interventions, imports from the US increased dramatically, while total exports to the US were unaffected....