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, as suggested in the rent-seeking literature. Controlling for firm performance and other factors, past lobbying increases the likelihood of current lobbying in our full sample. Because addicted firms should behave differently from other firms, we let an EM algorithm to sort our firms into groups with different propensity to lobby. A two pools model consisting of occasional and habitual rent-seekers emerges. Occasional rent-seekers' lobbying depends on their market performance. Habitual rent-seekers' lobbying is unrelated to the market performance of the firm, and only depends on previous lobbying. The evidence is consistent with political rent seeking having dynamic economies of scale: rent-seeking makes further rent-seeking easier and more lucrative