Focal Points in the Issue-Space: NGOs, Trade Policy and the Globalization Backlash

• Applicant: Professor Sebastian Krautheim, Ph.D.
• Subject Area: Economic Policy, Applied Economics ; Economic Theory
• Term: since 2024
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 552944111

In recent decades, Western societies have faced a notable “globalization backlash” (e.g. Colantone, Ottaviano, and Stanig, Handb. Int. Econ, 2022). We posit that advocacy NGOs such as Greenpeace, Attac or the Rainforest Action Network, are crucial players in this backlash: Through massive and well-mediatized campaigns they exert significant pressure both on firms (particularly regarding their internationalization and sourcing strategies) and governments, as evidenced by the spectacular last-minute failure of the EU-US Transatlantic Trade and Investment Partnership (TTIP) in 2016. We build upon the recent literature on the role of NGOs in international trade and combine it with elements from Grossman and Helpman (ReStud, 2021), who advocate for the inclusion of social identity theory into the economic analysis of the globalization backlash. The central premise – and novelty – of our project is this: we argue that NGOs serve as focal points for the social identification of consumers and voters, shaping campaigns and protests against both firms and governmental policies. In the first research line (RL1), we study the focal point an NGO sets in the issue-space. Continuing the long-standing cooperation with Pamina Koenig and Thierry Verdier (both Paris School of Economics, PSE), we have privileged access to the best currently available data set on global NGO campaigns against firms featuring 102,532 campaigns by 4,343 NGOs targeting 11,429 firms in 172 countries over 10 years with each campaign assigned at least one out of 736 issues. RL1/1 investigates the endogenous issue scope of NGOs theoretically and empirically. Inspired by very recent developments in the literature on multi-product firms in the product-space, RL1/2 analyzes each NGO’s focal point in the issue-space and links it to the theory developed in RL2/2. In the second research line (RL2), we adopt a theoretical approach, viewing NGOs and the globalization backlash through the lens of social identity theory. RL2/1 scrutinizes the massive NGO-led protests against free trade agreements like TTIP. We propose a model of trade negotiations where NGOs set focal points in the issue-space, altering the maximization problem of the government and possibly reversing its position in the negotiations. In RL2/2, in collaboration with Thierry Verdier (PSE), we make a methodological contribution to the microeconomic analysis of the NGO-sector, which links back to RL1: we suggest, to our knowledge, the first model of NGO competition in which NGOs strategically choose their focal points in the issue-space.

• DFG Programme: Research Grants
• International Connection: France
• Cooperation Partners: Professorin Dr. Pamina Koenig; Professor Dr. Thierry Verdier