Political Rents
Connecting to Power: Political Connections, Innovation, and Firm Dynamics
Ufuk Akcigit, Salomé Baslandze & Francesca Lotti
Econometrica, March 2023, Pages 529-564
Abstract:
How do political connections affect firm dynamics, innovation, and creative destruction? We extend a Schumpeterian growth model with political connections that help firms ease bureaucratic and regulatory burden. The model highlights how political connections influence an economy's business dynamism and innovation, and generates a number of implications guiding our empirical analysis. We construct a new large-scale data set for the period 1993–2014, on the universe of firms, workers, and politicians, complemented with corporate financial statements, patent data, and election data, so as to define connected firms as those employing local politicians. We identify a leadership paradox: market leaders are much more likely to be politically connected, but much less likely to innovate. Political connections relate to a higher rate of survival, as well as growth in employment and revenues, but not in productivity -- a result that we also confirm using the regression discontinuity design. At the aggregate level, gains from political connections do not offset losses stemming from lower reallocation and growth.
Disastrous Discretion: Political Bias in Relief Allocation Varies Substantially with Disaster Severity
Stephan Schneider & Sven Kunze
Review of Economics and Statistics, forthcoming
Abstract:
Allocation decisions are vulnerable to political influence, but it is unclear in which situations politicians use their discretionary power in a partisan manner. We analyze the allocation of presidential disaster declarations in the United States, exploiting the spatiotemporal randomness of all hurricane strikes from 1965-2018 along with changes in political alignment. We show that decisions are unbiased when disasters are either very strong or weak. Only after medium-intensity hurricanes do areas governed by presidents' co-partisans receive up to twice as many declarations. This hump-shaped political bias explains 8.3 percent of overall relief spending, totaling about USD 400 million per year.
Making countries small: The nationalization of districts in the United States
Ignacio Lago
Political Science Research and Methods, forthcoming
Abstract:
I rely on data from 31,754 electoral districts in the United States from 1834 until 2016 to explore how the nationalization of politics occurs within districts. I argue that in the early stages of the American democracy local concerns were more prominent in the distant districts from the capital city than in the nearby districts, and therefore the number of parties was greater in the former than in the latter. However, these differences vanished after the New Deal, when authority was centralized. Nationalization reduced the number of parties everywhere, but above all in the most distant district from Washington, D.C.
Lobbyists as Gatekeepers: Theory and Evidence
Alexander Hirsch et al.
Journal of Politics, forthcoming
Abstract:
Lobbyists are omnipresent in the policy-making process, but the value that they bring to both clients and politicians remains poorly understood. We develop a model in which a lobbyist’s value derives from his ability to selectively screen which clients he brings to a politician, thereby earning the politician’s trust and preferential treatment for his clients. Lobbyists face a dilemma, as their ability to screen also increases their value to special interests and the prices they can charge. A lobbyist’s profit motive undermines his ability to solve this dilemma, but an interest in policy outcomes -- due to either a political ideology or a personal connection -- enhances it, which paradoxically increases his profits. Using a unique data set from reports mandated by the Foreign Agents Registration Act, we find that lobbyists become more selective when they are more ideologically aligned with politicians, consistent with our prediction.
Does a firm’s lobbying activity respond to its peers’ lobbying activity?
Wei-Fong Pan
Public Choice, March 2023, Pages 297–324
Abstract:
Classic theoretical works of lobbying emphasise the importance of competition among interest groups to compete for resources, but empirical evidence of competitive forces in firms’ lobbying activities is limited. This study investigates how firms’ lobbying activities respond to peer lobbying. We show that firms increase their lobbying as their peers increase their lobbying. Such positive effects are stronger for larger firms and firms in more regulated industries. Aside from actively lobbying firms, non-lobbying firms are also more likely to start lobbying when their peers increase their lobbying. Lastly, we observe that Republican-leaning (Democrat-leaning) firms respond to the increase in lobbying by other Republican-leaning (Democrat-leaning) firms.
The Corrections Dilemma: Media Retractions Increase Belief Accuracy But Decrease Trust
Joshua Freitag et al.
Journal of Experimental Political Science, forthcoming
Abstract:
Why are prominent news media retractions so rare? Using data from a survey experiment in which respondents view simulated Twitter newsfeeds, we demonstrate the dilemma facing news organizations that have published false information. Encouragingly, media retractions are effective at informing the public -- they increase the accuracy of news consumers’ beliefs about the retracted reporting more than information from third parties questioning the original reporting or even the combination of the two. However, trust in the news outlet declines after a retraction, though this effect is small both substantively and in standardized terms relative to the increase in belief accuracy. This reputational damage persists even if the outlet issues a retraction before a third party questions the story. In a social media environment that frequently subjects reporting to intense scrutiny, the journalistic mission of news organizations to inform the public will increasingly conflict with organizational incentives to avoid admitting error.
The potential impact of emerging technologies on democratic representation: Evidence from a field experiment
Sarah Kreps & Douglas Kriner
New Media & Society, forthcoming
Abstract:
Advances in machine learning have led to the creation natural language models that can mimic human writing style and substance. Here we investigate the challenge that machine-generated content, such as that produced by the model GPT-3, presents to democratic representation by assessing the extent to which machine-generated content can pass as constituent sentiment. We conduct a field experiment in which we send both handwritten and machine-generated letters (a total of 32,398 emails) to 7132 state legislators. We compare legislative response rates for the human versus machine-generated constituency letters to gauge whether language models can approximate inauthentic constituency voices at scale. Legislators were only slightly less likely to respond to artificial intelligence (AI)-generated content than to human-written emails; the 2% difference in response rate was statistically significant but substantively small. Qualitative evidence sheds light on the potential perils that this technology presents for democratic representation, but also suggests potential techniques that legislators might employ to guard against misuses of language models.
Testing the Benefits of Public Deliberation
William Minozzi et al.
American Journal of Political Science, forthcoming
Abstract:
Public deliberation grows increasingly prevalent yet remains costly in terms of money and time. Accordingly, some suggest supplanting talk-based practices with individual, “deliberation within.” Yet we have little evidence either way on the additional benefits of public deliberation over its individual variant. We evaluate the benefits of public deliberation with a field experiment. With the cooperation of two sitting US Senators, we recruited several hundred of their constituents to deliberate on immigration reform. Participants were randomly assigned to either deliberate publicly in an online discussion, to deliberate individually, or to an information-only control. Across several measures, public deliberation yielded more benefits than individual deliberation. We find, moreover, little evidence to ground worries that differences in education, race, conflict avoidance, gender, or gender composition of deliberating groups will render public talk less valuable than individual deliberation.
Political Power and Market Power
Bo Cowgill, Andrea Prat & Tommaso Valletti
Columbia University Working Paper, March 2023
Abstract:
We study the link between political influence and industrial concentration. We present a joint model of political influence and market competition: an oligopoly lobbies the government over regulation, and competes in the product market shaped by this influence. We show broad conditions for mergers to increase lobbying, both on the intensive margin and the extensive margin. We combine data on mergers with data on lobbying expenditures and campaign contributions in the US from 1999 to 2017. We document a positive association between mergers and lobbying, both by individual firms and by industry trade associations. Mergers are also associated with extensive margin changes such as the formation of in-house lobbying teams and corporate PACs. We find some evidence for a positive association between mergers and higher campaign contributions.
Never Forget the First Time: The Persistent Effects of Corruption and the Rise of Populism in Italy
Gianmarco Daniele, Arnstein Aassve & Marco Le Moglie
Journal of Politics, forthcoming
Abstract:
The article studies the long-term impact of corruption on trust toward institutions. Previous studies have demonstrated that exposure to corruption may lower institutional trust over the short term. Whether those short-term effects translate into a persistent effect is not known. We study the onset of a corruption shock that took place in Italy between 1992 and 1994. Using recent data collected by the Organization for Economic Cooperation and Development, we find that young first-time voters exposed to the corruption scandal and its political consequences in the early 1990s still today have significantly lower institutional trust and were more likely to choose populist parties at the 2018 national elections.
Anchoring Political Preferences: The Psychological Foundations of Status Quo Bias and the Boundaries of Elite Manipulation
Kevin Arceneaux & Stephen Nicholson
Political Behavior, forthcoming
Abstract:
Public policy is often about numbers that affect people’s lives in fundamental ways. Given the central importance of numbers, we examine anchoring, a heuristic in which people are influenced by an initial number in expressing a preference. Across a series of experiments and three unique surveys, we find evidence of anchoring effects, but not uniformly so. In contrast to experiments in psychology and behavioral economics, we find no evidence that irrelevant or arbitrary anchors shape policy preferences. Yet, when provided politically relevant anchors that clearly correspond to the policy proposal, we find evidence of strong effects, even in the face of party cues or in the absence of a status quo policy point. Taken together, our results demonstrate that there is a psychological explanation for why the status quo occupies a powerful position in policy debates as well as why agenda setting is so influential.
Donor Activity is Associated with US Legislators’ Attention to Political Issues
Pranav Goel et al.
University of Maryland Working Paper, February 2023
Abstract:
We investigate the relationship between money and congressional behavior by conducting the first comprehensive analysis of the association between legislators’ campaign donors and the policy issues they prioritize with congressional speech. Prior research has focused on tangible effects of donations on congressional bill votes. Our alternative approach considers the relationship between money and legislators’ speeches, the latter being an important component of congressional behavior that reflects legislators’ policy priorities and positions in a way that voting cannot. Using our new, comprehensive dataset covering the US House from 1995-2018, we find a robust relationship between donors and speech — which issues legislators talk about is more strongly associated with who gives them money than with their partisanship, committee membership, or home state. We further contribute a procedure for identifying speech and donation events that occur in close proximity to one another and share meaningful connections. Our framework, data, and findings can help increase the transparency of the role of money in politics.