In popular discussion, much has been made of the susceptibility of government policies to lobbying by foreigners—the general presumption being that this is harmful to the home economy. However, in a trade policy context this may not be the case. If the policy outcome absent any foreign lobbying is characterized by welfare-reducing trade barriers, foreign lobbying may reduce such barriers and possibly raise welfare. Using a new data set on foreign political activity in the United States, this paper investigates this question empirically. Tariffs and nontariff barriers are both found to be negatively related with foreign lobbying activity.

Grossman and Helpman (1994) present a theory of endogenous protection by explicitly modeling government-industry interactions for which mere “black-box” models previously existed. They obtain a Ramsey pricing-type solution to the provision of protection which emphasizes the role of inverse import penetration ratios and import elasticities. On the lobbying side, the model makes predictions about lobbying competition and lobbying spending according to deadweight costs from protection. The model not only makes for richer theory in terms of rigor and elegance, but its predictions are directly testable. Whether the Grossman-Helman model stands up to real-world data is investigated in this paper. Predictions from both the protection side and lobbying side are tested using cross-sectional U.S. nontariff barrier data. We also compare the “second-generation” Grossman-Helpman model with a more traditional specification. Our results call for serious consideration of this model in the political economy literature.

Bayesian inference and model comparisons are easily performed quite accurately using Gibbs sampling, even if (1) the likelihood is analytically intractable and (2) nonstandard prior probability density functions (pdfs) are required. In this study Bayesian model comparisons are performed among five competing theories of endogenous protection. Tariff and nontariff barrier data from 1983 between the United States and five OECD partner countries-Japan, France, Germany, Italy, and the United Kingdom-are used in the analysis. Posterior odds based on two priors show special-interest models to be more likely than other models in determining U.S. protection.