A pen and a phone
Preemptive Policy Experimentation
Steven Callander & Patrick Hummel
Econometrica, July 2014, Pages 1509–1528
Abstract:
We develop a model of experimentation and learning in policymaking when control of power is temporary. We demonstrate how an early office holder who would otherwise not experiment is nonetheless induced to experiment when his hold on power is temporary. This preemptive policy experiment is profitable for the early office holder as it reveals information about the policy mapping to his successor, information that shapes future policy choices. Thus policy choices today can cast a long shadow over future choices purely through information transmission and absent any formal institutional constraints or real state variables. The model we develop utilizes a recent innovation that represents the policy mapping as the realized path of a Brownian motion. We provide a precise characterization of when preemptive experimentation emerges in equilibrium and the form it takes. We apply the model to several well known episodes of policymaking, reinterpreting the policy choices as preemptive experiments.
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Corporate Distress and Lobbying Evidence from the Stimulus Act
Manuel Adelino & Serdar Dinc
Journal of Financial Economics, forthcoming
Abstract:
The literature on distressed firms has focused on these firms’ investment, capital structure, and labor decisions. This paper investigates a novel aspect of firm behavior in distress: how financial health affects a firm's lobbying and, consequently, its relationship with the government. We exploit the shock to nonfinancial firms during the 2008 financial crisis and the availability of the stimulus package in the first quarter of 2009. We find that firms with weaker financial health, as measured by credit default swap spreads, lobbied more. We also show that the amount spent on lobbying was associated with a greater likelihood of receiving stimulus funds.
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Presidents and the U.S. Economy: An Econometric Exploration
Alan Blinder & Mark Watson
NBER Working Paper, July 2014
Abstract:
The U.S. economy has grown faster — and scored higher on many other macroeconomic metrics — when the President of the United States is a Democrat rather than a Republican. For many measures, including real GDP growth (on which we concentrate), the performance gap is both large and statistically significant, despite the fact that postwar history includes only 16 complete presidential terms. This paper asks why. The answer is not found in technical time series matters (such as differential trends or mean reversion), nor in systematically more expansionary monetary or fiscal policy under Democrats. Rather, it appears that the Democratic edge stems mainly from more benign oil shocks, superior TFP performance, a more favorable international environment, and perhaps more optimistic consumer expectations about the near-term future. Many other potential explanations are examined but fail to explain the partisan growth gap.
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Chris Rohlfs, Ryan Sullivan & Robert McNab
Economic Inquiry, forthcoming
Abstract:
Presidential elections are often seen as referendums on the health of the economy; however, little evidence exists on the president's ability to influence gross domestic product (GDP). This study examines the effect of the incentive to be reelected and the resulting increase in presidential effort on GDP growth. Growth is found to rise in reelection years for first-term presidents after 1932 and to fall in election years before 1932, when reelection was uncommon, and for second-term presidents generally. This effect is largest for high-quality presidents — who probably have the highest return to effort — and is spread across multiple sectors of the economy.
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Policy Experimentation, Political Competition, and Heterogeneous Beliefs
Antony Millner, Hélène Ollivier & Leo Simon
London School of Economics Working Paper, June 2014
Abstract:
We consider a two period model in which an incumbent political party chooses the level of a current policy variable unilaterally, but faces competition from a political opponent in the future. Both parties care about voters payoffs, but they have different beliefs about how policy choices will map into future economic outcomes. We show that when the incumbent party can endogenously influence whether learning occurs through its policy choices (policy experimentation), future political competition gives it a new incentive to distort its policies - it manipulates them so as to reduce uncertainty and disagreement in the future, thus avoiding facing competitive elections with an opponent very different from itself. The model thus demonstrates that all incumbents can find it optimal to ‘over experiment’, relative to a counter-factual in which they are sure to be in power in both periods. We thus identify an incentive for strategic policy manipulation that does not depend on self-serving behavior by political parties, but rather stems from their differing beliefs about the consequences of their actions.
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Laurent Bouton et al.
NBER Working Paper, June 2014
Abstract:
Why are U.S. congressmen reluctant to support gun control regulations, despite the fact that most Americans are in favor of them? We argue that re-election motives can lead politicians to take a pro-gun stance against the interests of an apathetic majority of the electorate, but in line with the interests of an intense minority. We develop a model of gun control choices in which incumbent politicians are both office and policy motivated, and voters differ in the direction and intensity of their preferences. We derive conditions under which politicians support gun control early in their terms, but oppose them when they approach re-election. We test the predictions of the model by analyzing votes on gun-related legislation in the U.S. Senate, in which one third of the members are up for re-election every two years. We find that senators are more likely to vote pro gun when they are close to facing re-election, a result which holds comparing both across and within legislators. Only Democratic senators "flip flop'' on gun control, and only if the group of pro-gun voters in their constituency is of intermediate size.
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Flip-Flopping: Ideological Adjustment Costs in the United States Senate
Jason DeBacker
Economic Inquiry, forthcoming
Abstract:
Using a long panel of roll call voting data, I find that “flip-flopping” senators face significant electoral costs when changing positions. In models of electoral competition, as the costs to candidates changing position approach zero, the equilibrium prediction is the convergence of platforms. Such convergence is at odds with empirical observation. Using a dynamic, structural model of candidate positioning, I identify the nature of the costs associated with changing position that may result in such non-convergence.
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The Constraining, Liberating, and Informational Effects of Nonbinding Law
Justin Fox & Matthew Stephenson
Journal of Law, Economics, and Organization, forthcoming
Abstract:
We show that nonbinding law can have a constraining effect on political leaders, because legal compliance is a costly signal to imperfectly informed voters that the leader is unbiased. Moreover, nonbinding law can also have a liberating effect, enabling some leaders to take action when they otherwise would have done nothing. In addition, we illustrate how voters may face a trade-off between the legal standard that induces optimal behavior of the current leader (i.e., that most effectively addresses the moral hazard problem) and the legal standard that optimizes selection of future leaders (i.e., that most effectively addresses the adverse selection problem). We discuss a range of positive and normative implications that follow from our analysis.
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Is It Whom You Know or What You Know? An Empirical Assessment of the Lobbying Process
Marianne Bertrand, Matilde Bombardini & Francesco Trebbi
American Economic Review, forthcoming
Abstract:
Do lobbyists provide issue-specific information to members of Congress? Or do they provide special interests access to politicians? We present evidence to assess the role of issue expertise versus connections in the US Federal lobbying process and illustrate how both are at work. In support of the connections view, we show that lobbyists follow politicians they were initially connected to when those politicians switch to new committee assignments. In support of the expertise view, we show that there is a group of experts that even politicians of opposite political affiliation listen to. However, we find a more consistent monetary premium for connections than expertise.
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Partisan Effects of Legislative Term Limits
Andrew Hall
Legislative Studies Quarterly, August 2014, Pages 407–429
Abstract:
Term limits remain a popular policy reform and have generated a great deal of scholarship as a result. Although many predicted that term limits would benefit the Republican party, the literature finds no marked partisan effects, possibly because termed-out legislators have largely been replaced by copartisans. This article demonstrates that term limits have indeed had partisan effects — just not on electoral outcomes. Term limits have caused a significant reallocation of institutional power from Democrats to Republicans (as measured by contributions from access-oriented interest groups), in large part because they have removed more senior Democrats than Republicans. The partisan effects of term limits therefore point to the institutional value of seniority.
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Gergely Ujhelyi
Journal of Public Economics, October 2014, Pages 15–25
Abstract:
Civil service rules governing the selection and motivation of bureaucrats are among the defining institutions of modern democracies. Although this is an active area of reform in the US and elsewhere, economic analyses of the issue are virtually nonexistent. This paper provides a welfare evaluation of civil service reform. It describes the effect of reform on the interaction of politicians, voters, and bureaucrats, and shows that society often faces trade-offs between improving the bureaucracy or improving the performance of politicians. My results characterize the conditions under which merit-based recruitment and civil service protections such as tenure can improve welfare.
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The Political Mobilization of Firms and Industries
Edward Walker & Christopher Rea
Annual Review of Sociology, 2014, Pages 281-304
Abstract:
Corporate political activity is both a long-standing preoccupation and an area of innovation for sociologists. We examine the limitations of investigating business unity without focusing directly on processes and outcomes and then review studies of five types of business political action that offer lenses into corporate power in the United States: engagement in electoral politics, direct corporate lobbying, collective action through associations and coalitions, business campaigns in civil society, and political aspects of corporate responsibility. Through these avenues, we highlight four shifts since the 1970s: (a) increasing fragmentation of capitalist interests, (b) closer attention to links between business lobbying and firms' social embeddedness, (c) a turn away from the assumption that money buys political victories, and (d) new avenues of covert corporate influence. This body of research has reinvigorated the classic elitist/pluralist debate while also raising novel questions about how business actors are adapting to (and generating changes within) their sociopolitical environments.
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Adrienne Smith
Politics & Gender, September 2014, Pages 313-340
Abstract:
While individual women representatives in government have been found to behave differently than men, the causal connection between the increased presence of women in elected offices and the production of women-friendly policies is tenuous at best. This study leverages the variation in women's office holding, government structures, and policy outputs found in American cities to address that puzzle. It argues that when women obtain leadership positions in municipal government and when the positions they hold have greater power relative to other municipal positions, cities will be more likely to produce policy outputs that are often associated with women's interests and needs. Utilizing an original city-level dataset and modeling women's presence as mayors and policy outputs endogenously, the results reveal that empowered female executives in municipal governments influence expenditure decisions made as part of the federal Community Development Block Grant program. The findings suggest that political scientists should consider not only the presence of an underrepresented group, but also the relative amount of power that group has when assessing the effects on substantive representation.
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Representing Latinos: Examining Descriptive and Substantive Representation in Congress
Sophia Wallace
Political Research Quarterly, forthcoming
Abstract:
Using an original data set of roll call votes and bill co-sponsorships across three high salience issues (immigration, labor, and education) and one low salience issue (social security), this article analyzes the 111th Congress to assess representation of Latinos. Partisanship is the key determinant in member behavior on voting, not the member’s race or ethnicity or constituent demographics. For bill co-sponsorships, Latino members are only more active on high salience issue areas compared with non-Latino members. Increases in Latino population do not influence behavior. The results also indicate that African American and Democratic legislators offer Latinos considerable amounts of substantive representation.
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Tanya Bagashka & Jennifer Hayes Clark
State Politics & Policy Quarterly, forthcoming
Abstract:
We investigate the relationship between electoral institutions and committee autonomy in the context of U.S. state legislatures. The distributive theories of legislative organization suggest that electoral rules that make personal reputations more important motivate legislators to decentralize power and enhance committee autonomy to be able to target particularistic goods to their local constituencies. We argue that the distributive theories have direct implications for the relationship between candidate selection procedures and committee autonomy. The need to reach out to a large number of voters and to amass significant financial resources in states with more inclusive candidate selection procedures such as the open primary makes representatives more dependent on special interests, which is conducive to legislative particularism and committee autonomy. We take advantage of the great variation across the American states to investigate the effects of candidate selection procedures, a factor neglected in the previous literature. Examining 24 state legislatures from 1955 to 1995, we find that the inclusiveness of the selectorate, or the body electing candidates, has a significant effect on committee autonomy with more inclusive primary elections leading to more autonomous committee systems. By contrast, however, term limits were not a significant predictor of committee autonomy. This contributes to our understanding of how legislators amend institutional arrangements to achieve their electoral goals.
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Blacklisted Benefactors: The Political Contestation of Nonmarket Strategy
Mary-Hunter McDonnell & Timothy Werner
University of Texas Working Paper, July 2014
Abstract:
To identify whether or not social movement challenges affect firms’ political strategies, we exploit boycotts of firms through a matched sample, difference-in-difference analysis of PAC donations. Using a new dataset that includes all boycotts of public firms over a 15-year period that received national media attention, we ask a) whether, when facing a boycott, firms decrease their giving to politicians running for federal office, b) whether politicians running for office refund a higher proportion of the donations given by these boycotted firms, and c) what mechanisms drive the relationship between activist challenges and refunded contributions. Ultimately, we find robust evidence that when a firm faces a boycott, it subsequently decreases its PAC contributions and has more of its PAC contributions refunded. With regard to the boycott’s characteristics, we find that the percentage of donations refunded is greater when the boycott receives more media attention and targets a parent company and when the public perceives the claim behind the boycott as more legitimate. With regard to the target firm’s characteristics, we find that boycotts increase the percentage of donations refunded when the firm occupies a position of low status within its industry, operates in an unregulated industry, does not engage in attempts to manage public impressions of its social behavior, and concedes to the boycott. These findings have three implications. First, as the first researchers to analyze politicians’ refunds to firms, we provide new evidence as to how these elites react when the cost of associating with such interests rise. Second, in an era in which the cost of organizing against corporate interests is dropping, we provide the first evidence that activists can constrain corporate nonmarket strategy, at least in the public realm of campaign finance. Finally, since our results demonstrate that firms’ disclosed electoral activity is constrained by activism, firms’ may shift more of their contributions and political expenditures into the undisclosed electoral channels allowed by Citizens United v. FEC.
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Scott MacKenzie
Political Research Quarterly, forthcoming
Abstract:
The Seventeenth Amendment transferred responsibility for selecting senators from state legislatures to voters. Scholars argue that voters’ ability to sanction performance ex post altered senators’ legislative activities. I focus on voters’ ex ante screening of senators. Using original data on senators’ political experiences, I show that direct elections increased the professionalization of pre-Senate careers. I then use sequence analysis methods to identify career paths to the Senate. Pre-Senate career paths help explain which senators received important committee assignments. These findings challenge claims that direct elections had minimal effects on the Senate’s composition and that recruitment is unrelated to legislative behavior.
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Interest-Group Size and Legislative Lobbying
Maik Schneider
Journal of Economic Behavior & Organization, October 2014, Pages 29–41
Abstract:
We develop a model of legislative decision making in which lobbying and public policy are jointly determined. We examine how policy outcomes depend on the sizes of the interest groups. While a larger size typically involves favorable effects on policy, we also identify threshold levels of interest-group size where a lobby will be harmed if it becomes larger. This may provide another rationale as to why some interests do not or not fully organize. Spending limits can remove adverse policy effects of interest-group size. However, this is not necessarily welfare improving. Moreover, we find that endogenous proposal making may turn a second-mover advantage in standard legislative lobbying models into a second-mover disadvantage.