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

By Morck, Randall; Sepanski, Jungsywan et al. | Economic Inquiry, July 2001 | Go to article overview
Save to active project

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

Morck, Randall, Sepanski, Jungsywan, Yeung, Bernard, Economic Inquiry


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. (JEL F13)


Rent-seeking activities plausibly have dynamic economies to scale. Past rent-seeking experience should reduce the cost of further rent seeking and increase its return. Thus, rent seekers may, over time, become more prone to further rent seeking and even become dependent on it. Given the large welfare losses theoretically associated with rent seeking (e.g., Bhagwati [1982, 1988] and Magee et al. [1989]), a better understanding of actual rent-seeking behavior is required. In particular, empirical verification of the self-sustaining nature of rent seeking is of fundamental importance.

Lobbying for protection from import competition is a form of rent seeking. This article uses data on lobbying for protection by firms in the steel industry in the 1970s and 1980s to show that a habit-forming effect does exist. In a preliminary investigation, we pool all firm-level data and find that past lobbying increases the current tendency to lobby. However, not all firms have the same propensity to lobby. To allow heterogeneity among firms' dependence on past lobbying, we apply an expectation-maximization (EM) algorithm approach (Dempster et al., 1977) to a lagged-dummy model (Heckman, 1982a, 1982b). This lets our firms sort themselves into groups according to the determinants of their lobbying activity.

Our statistical results suggest that an acceptable division of our data is a division into two groups: occasional lobbyers, whose lobbying depends on the firm's market performance; and habitual lobbyers, whose lobbying is essentially unrelated to the firm's business situation and depends mainly on past lobbying. Firms that never lobby for protection end up in the first group. Greater firm size and greater focus in steel production are associated with increased lobbying in both groups, but the influence is stronger for occasional lobbyers. Past sales growth and spending on modern equipment are associated with curtailed lobbying by occasional rent seekers but are unrelated to lobbying by habitual rent seekers. Changes in cash flow have no influence in either. Generally, habitual lobbyers are larger firms whose business is more concentrated on steel. They are naturally more inclined than occasional lobbyers to initiate lobbying. However, their lobbying appears to have become a habit divorced from their market pe rformance. These results are consistent with the presence of economies of scale in rent seeking and with rent seeking being habit-forming (e.g., Magee et al., 1989).

In the next section, we describe the intensive lobbying for protection in the U.S. steel industry in the 1970s and 1980s. We justify our contentions that lobbying for protection by steel firms in the sample period may be habit-forming and that different groups of firms should have dissimilar propensities to lobby for protection. In section III, we explain the EM algorithm approach. We explain the data in the fourth section and report our results in section V. Section VI concludes.


In the United States, domestic firms under import competition pressure often complain to the government about "unfair" foreign practice.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Cite this article

Cited article

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

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


Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?