Economic Influence Activities, Congressional Committees, and the Industrial Geography of the United States

Abstract : This paper empirically examines the economic influence activities (EIA) of firms. We argue that firms invest in jobs and establishments in congressional committee member districts that have oversight and influence over their businesses and industries. This investment increases as the legislator increases in power in Congress. However, as the legislator exits the committee, this investment slows. Firms do not exit their investments, but cease to continue investment in the district. Our theory makes three predictions. First, EIA by firms will be higher in congressional districts where the legislators have substantial political influence over the firm, relative to congressional districts in where legislators have little influence over the firm. Second, EIA will increase with the legislators’ power on the focal committee. Third, when a legislator exits the committee, EIA will diminish. We test these predictions by analyzing the Trinet biennial census of establishments, mapped into the congressional committee structure of the U.S. Congress. With these datasets, we are able to track the investment and employment of firms in each industry in each congressional district over time. Using fixed effects models, we show that the predictions of the theory are largely supported in the data. We explore causality by using exogenous exits by politicians by death and scandals to further complement our core analysis.

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Motivating Lobbyists: Evidence from the U.s. Foreign Agents Registration Act

Abstract : Our paper investigates how firms motivate their agents in the absence of explicit incentives, using the US lobbying industry as a case in point. We develop a simple principal-agent model in which a lobbyist and a client interact repeatedly. Consistent with US law, we assume the client cannot offer a formal incentive contract that explicitly links the lobbyist’s pay to measures of its success. However, the client observes the advocacy effort exerted by the lobbyist and hence can motivate him informally via implicit incentives. We show that the stronger the lobbyist’s political connections relevant to alternative clients, the lower the informal incentive the focal client can credibly commit to pay and hence the lobbyist’s effort. We test the theoretical predictions integrating data from the Foreign Agent Registration Act from 1999 to 2017 with data on lobbyists’ political connections in congressional committees.

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Partial Exclusivity Can Resolve the Empirical Puzzles Associated with Rent-seeking Activities

Abstract : This study presents a model in which interest groups compete for partially exclusive rents and the number of winners is stochastic. Partial exclusivity can explain the low empirical estimates of rent dissipation that create the Tullock paradox. However, partial exclusivity also increases aggregate effort and social waste. This study includes an empirical analysis of U.S. state-level lobbying expenditures, which reveals another puzzle regarding the constant relationship between aggregate expenditures and the number of spenders. In contrast to the existing rent-seeking contest models, this outcome is consistent with partially exclusive rents when the contest is designed by a rent-seeking maximising policymaker.

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