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.