The Returns from Rent-Seeking: Campaign Contributions, Firm Subsidies, and the Byrd Amendment

This paper examines Congressional support of the Byrd Amendment, a new antidumping law that directs the U.S. Customs Service to distribute collected duties to protected firms. A critical feature of the Byrd Amendment is that it produces a highly transparent measure of how much each firm is rewarded for its rent-seeking efforts to secure the bill’s passage, specifically the dollar value its Byrd disbursement. Therefore, this policy provides researchers with a unique setting in which to study the link between campaign contributions, Congressional behavior, and the subsequent financial returns to firms. Our empirical results show that campaign contributions from potential beneficiaries increased the likelihood that lawmakers would sponsor the Byrd Amendment. We also show that political contributions from the law’s beneficiaries increased with the rewards that they expected to receive, although not by as much as predicted by some political economy models of trade policy.Byrd Amendment, Antidumping, Campaign Contributions, Political Economy of Trade Policy

Steel Safeguards and the Welfare of U.S. Steel Firms and Downstream Consumers of Steel: A Shareholder Wealth Perspective

This paper analyzes the steel safeguards implemented and subsequently removed during 2001-2003. Our results reveal that for shareholders of U.S. steel companies, safeguards generated positive “abnormal” returns of approximately 6%; and the cancellation of the safeguards resulted in wealth gains of about 5%. Steel shareholders experienced negative abnormal returns of -5% in response to the WTO ruling that the U.S. violated WTO law. The results here are consistent with the neoclassical view that producers gain at the expense of consumers. Downstream consumers in transportation equipment and electrical equipment showed the clearest negative reaction to the safeguards. Moreover, steel firms that received larger cash disbursements under the Byrd amendment received additional wealth gains when the safeguard duties were imposed. Finally, empirical results indicate that U.S. downstreamconsuming firms that diversify production in NAFTA countries avert some trade policy risk associated with the initiation of the safeguard investigation and the imposition of the safeguard duties.Antidumping Policy; Welfare

Innovation Through Protection: Does Safeguard Protection Increase Investment in R and D?

We perform the first empirical study to focus on the relationship between trade protection and investment in Research and Development. Our results support predictions from the theoretical literature that temporary tariffs stimulate research and development, although we find no evidence that this effect diminishes as the termination of protection approaches as predicted by some theoretical models. We also find little evidence that quotas reduce research and development as predicted by multiple theoretical works. Finally, our results indicate that temporary tariffs result in decreased capital investment, perhaps because firms use periods of temporary protection to shutdown unprofitable facilities. This reveals an important distinction in firm behavior with regard to investment in tangible versus intangible capital during periods of trade protection.Research and Development, Strategic Protection

Essays Honoring Charles M. Haar

There are various ways to honor and declare appreciation to a colleague. For Charles Haar, this festschrift seems just right

Energy and Economic Returns by Crop Rotation

Energy and economic returns are presented from 2006-2011 comparing three cropping systems at the ISU Marsden Farm: 2-year conventional corn-soybean rotation and 3- and 4-year rotations that add small grain, red clover and alfalfa