Firms’ Support for Climate Change Legislation: Industry Competition and the Emergence of Green Lobbies
Policies to mitigate global climate change entail significant economic costs. Yet a growing number of firms lobby actively in favor of regulation to mitigate carbon emissions. Why do firms support environmental policies that directly increase production costs? By imposing differential costs on market participants, policies designed to mitigate carbon emissions shift market share towards firms with low anticipated adjustment costs. I develop a model of climate change policy making in the presence of market competition and show how heterogeneity in adjustment costs induces a preference for regulation among low-cost firms. Reducing adjustment costs for high-cost firms may lead to worse regulatory outcomes by eroding political demand for regulation. I test these arguments using firm-level data on lobbying in the U.S. Congress and find strong support: firms anticipating high competitor adjustment costs are more likely to lobby in favor of climate change legislation. The paper is available here.
Partisanship and Learning in the Multilateral Trade Regime
Negotiators of international economic agreements must contend with uncertainty about how formal rules translate into changes in the behavior of signatory states and private actors. Information gathering to reduce this uncertainty is a key component of international negotiations. Outside observers can infer the results of information gathering through its influence on resulting agreements. Yet inference is imperfect since agreements are also shaped by the preferences of negotiating parties. I develop these arguments in the context of negotiations surrounding the accession of new members to the World Trade Organization (WTO). I analyze a formal model of sequential negotiations in which outcomes reflect novel information and agent preferences, demonstrating that the outcome of negotiations may be persuasive even if it is dominated by partisan preferences. I test the model's implications by studying states' participation in accession negotiations. I find consistent support for the argument, taking into account a range of alternative explanations.