The Market for Legislative Influence over Regulatory Policy

Abstract: Interests in the US telecommunications industry are shown to have a sophisticated understanding of the political process, and to behave strategically in their allocation of contributions to state legislators as if seeking to purchase influence over regulatory policy. We find that interests respond defensively to contributions from rivals, take into account the configuration of support available to them in both the legislature and the regulatory commission, and vary their contributions according to variations in supply prices for influence by different legislatures. This strategic behavior supports a theory that commercially motivated interests contribute campaign resources in order to mobilize legislators to influence the decisions of regulatory agencies. We also report evidence that restrictions on campaign finance do not affect all interests equally. Our results suggest that prohibitions on corporate contributions disadvantage interests lacking effective associated Political Action Committees (PACs), while limits on corporate and PAC contributions constrain the contributions of some well resourced interests but not others.