The Value of Political Geography: Evidence from the Redistricting of Firms

Abstract : We demonstrate that political geography has value to firms. We do so by exploiting shocks to political maps that occur around constitutionally mandated redistricting cycles in the United States. These shocks keep some firms in Congressional districts that are largely unchanged at one extreme and move firms to entirely new districts with a different set of constituents at the other extreme. We find that firms benefit from relatively less geographic change and firms suffer from being moved into districts that are more competitive across parties relative to safer districts or no change. The effects are not trivial in magnitude. Moreover, they do not depend on whether the firm will retain the same politician or is active in making campaign contributions.

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Informational Lobbying and Counter-lobbying over Budgets

Abstract : We present a simple model of informational lobbying by competing interest groups. In the model, lobbying effort is costly and endogenous while information revelation is explicit and strategic. We examine the impact on lobbying expenditures of 1) partisan policy bias in the legislature, 2) differential party control over proposal power and veto power, and 3) two different budgetary institutions (annual and biannual budgeting). Many of the predictions are new to the literature. We then test the model’s predictions with lobbying expenditure data from 590 firms and unions operating in 12 states. The predicted patterns are clearly present in the data.

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Market Concentration and Lobbying Expenditures

Abstract : The collective action literature predicts that less-concentrated industries spend less than more concentrated industries on lobbying activities. This paper presents a robust empirical fact that is at odds with this core result. To explain this fact, I include a neglected but, arguably, important dimension in the analysis: the level of excludability of the goods being lobbied. I present examples of excludable US political goals and, using new measures of excludability at the industry level, I show that less-concentrated industries tend to lobby more heavily for excludable goods. The central point is that neglecting the fact that different industries can lobby for goals that differ by their level of excludability can bias the estimates that link market concentration and group efforts. Then, I show that once one controls for the level of excludability in the industry-level lobbying goals, the standard collective action prediction is reestablished. I end this chapter by using national-level mergers as an exogenous source of changes in city market concentration. I show that, controlling for the level of excludability of their advocacy goals, firms that faced these shocks increased their lobbying expenditures disproportionately, providing validity to Olson's seminal prediction.

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