Politically Connected Firms: Trade, Competition and Rent-Seeking

Abstract

This paper examines how companies respond to global economic shocks by seeking political connections. Using company-level data, the study explores how exposure to increased trade competition—specifically, rising Chinese imports—affects U.S. firms' lobbying strategies. The findings reveal that companies facing greater economic pressures are more likely to hire politically connected lobbyists, particularly in industries more exposed to trade. These findings indicate that, during periods of economic instability, firms actively pursue political influence as a strategy to manage uncertainty and safeguard their interests.