Habitual and Occasional Lobbyers in the US Steel Industry: An EM Algorithm Pooling Approach

Using firm level data from the U.S. steel industry, we find that lobbying for import protection is habit forming. Controlling for firm performance and other factors, past lobbying increases the likelihood of current lobbying in our full sample. Expecting heterogeneity in lobbying behavior among firms, we let an EM algorithm sort our firms into groups with different propensities to lobby. A two-pool model consisting of occasional and habitual lobbyers emerges. Occasional lobbyers’ lobbying depends on their market performance. Habitual lobbyers’ lobbying turns out to be unrelated to firm performance, and only depends on past lobbying. The letter tends to be larger steel firms whose business is more focused in steel. They are thus naturally more inclined than occasional lobbyers to have lobbied for protection. Our evidence is consistent with dynamic economies of scale in protection seeking breeding protection-dependent firms. JEL classification: F13