Habitual and Occasional Lobbyers in the U.S. Steel Industry: An Em Algorithm Pooling Approach

Using U.S. steel firm data, we find that lobbying for import protection appears to be habit-forming. To identify heterogeneity in lobbying behavior among firms, we use an expectation-maximization algorithm to sort our firms into groups with different propensities to lobby and estimate the determinants of lobbying in each group. A two-pool model emerges: occasional lobbyers' lobbying depends on their market performance, and habitual lobbyers' lobbying only depends on past lobbying. The latter tends to be larger steel firms whose business is more focused in steel. Our evidence is consistent with dynamic economies of scale in protection seeking breeding protection-dependent firms.