Join hands or walk alone? Evidence on lobbying for trade policy in India

Abstract

Using primary evidence for 146 Indian manufacturing firms, I examine single and dual lobbying strategies for trade policy influence, and the factors driving firm's choice of these strategies. Firms can adopt a single strategy, by lobbying collectively as a group (Join Hands), or lobbying individually as a firm (Walk Alone). Firms can also adopt a dual strategy, that is, a combination of collective and individual lobbying. The choice of strategy is affected by sector concentration and by tradeoffs between lobbying intensity for sector‐wide and firm‐specific outcomes. The following findings are new for India: First, majority of Indian firms (more than 64% in the sample) use a dual strategy, suggesting the importance to better understand what drives dual strategies. Second, the likelihood of adopting a dual lobbying is higher in sectors that are characterized by low concentration (dispersion is higher), indicating a strong competition effect over free‐riding. Third, relative to the single strategy of collective lobbying, Indian manufacturing firms are likely to join hands while walking alone when targeting firm‐specific outcomes, but prefer to walk alone (single strategy of individual lobbying) when there are tradeoffs between different outcomes, to react quickly. Finally, the availability of resources and firm's perceived effectiveness of its lobbying are significant drivers for the strategy choice.

Population ecology of interest groups in India: a basis for comparative framework

“…Spain and Italy: Rozbicka and Kaminski, 2022), with lobbying widely perceived as a 'negative' activity by the public in some EU countries (Rozbicka et al, 2020). Furthermore, India does not record interest groups in any form of official national database (Saha 2017(Saha , 2019, similar to, for example, Australia and Italy which do not have a registry of interest groups (Fraussen and Halpin, 2016) or Lithuania, where a base of the information on interest groups is only a directory of Lithuanian business entities (Šarkutė et al, 2017) that explicitly excludes non-governmental organizations.…”

“…Yadav conducted surveys with business associations in India andBrazil (2006), andChina (2008). With models using as control groups labour unions (20%) and social and environmental groups (10%), Saha (2017) surveyed 250 firms that eventually gave 146 eligible responses. The most similar to the Western metrics and advanced analysis of business associations has been conducted by Saha (2017) when looking at India's trade policy.…”

Inclusive Trade: Four Crucial Aspects

“…Governments are the principal agents deciding trade policies, but non-state actors are also increasingly engaged in these processes. Key among these actors are businesses, and interactions between governments and businesses have been critical in trade policymaking processes -both in developed and developing countries (Capling and Low 2010;Saha 2019Saha , 2020Gawande et al 2009). Civil society has also strived to play a role, especially on environmental issues, labour rights, and in voicing concerns over negative effects of globalisation.…”

Trade openness and political distortions

“…Baldwin (1989) and Gawande and Krishna (2003) review early works in this area. Mitra (1999), Grossman and Helpman (1994), Magee (2002), Hiscox (2004), Maggi and Rodriguez‐Clare (2007), Acharya (2015), and Saha (2020) present recent theories of lobbyist‐driven protectionist policies. Goldberg and Maggi (1999), Gawande and Bandyopadhyay (2000), Bombardini (2008), and Kim (2017) are examples of studies conducting the empirical analysis.…”