Firm Heterogeneity and Participation in Trade Politics

Abstract

Industries seeking trade protection are commonly interpreted to be motivated by the economic gains stemming from decreased foreign competition. Yet, while protection for an industry results in reduced competition for all domestic industry members, a question that remains is why some firms in protected industries do not seek protection or even actively oppose trade protection for their industry. This paper studies participation in trade policy from a heterogeneous firms perspective. Using AD cases initiated between 2010 and 2015 in the European Union, I identify study the differences between firms that lodge antidumping complaints compared to peers within the same industries that did not participate in the complaints. firms in industries that participated in antidumping petitions. Comparing firm-level characteristics of firms that participate in antidumping petitions to firms that do not participate, I develop three main insights of the determinants of firm participation in trade policy. First, firms that are relatively larger and less productive are more likely to initiate an AD complaint. Second, firms with falling productivity levels are relatively more likely to initiate an AD complaint. This result indicates that AD policy is an instrument used more frequently by producers that are less productive than their peers.