Lobbying and productivity
Huneeus and Kim study the endogeneity between firms’ lobbying expenditure and their size. They find that:
- A 10 percent increase in lobbying expenditure leads to a 3 percent gain in revenue;
- In the US, the firms’ lobbying activity decreases aggregate productivity
by 22 percent relative to an economy without lobbying activity.
The Effects of Firms’ Lobbying on Resource Misallocation
Authors: Federico Huneeus, In Song Kim
From: Princeton University, MIT
Lobbying and efficiency
Gutiérrez and Philippon study the entry and exit of firms across U.S. industries over the past 40 years. They find that the elasticity of entry with respect to Tobin’s Q was positive and significant until the late 1990s but declined to zero afterwards. This decline is consistent across data sources and is stronger outside manufacturing. They find find that neither returns to scale nor technological costs can explain the decline in the Q- elasticity of entry, but lobbying and regulations can. In particular, their results show that regulations and lobbying are bad for small firms relative to large ones as the latter use lobbying to protect their rents.
The failure of free entry
Authors: Germán Gutiérrez, Thomas Philippon
From:New York University
Lobbying and banking regulation
Gersbach and Papageorgiou developed a theoretical framework that describes the mechanism through which bankers lobby on banking regulation. They show that:
- When bankers consider all general equilibrium effects on the economy, incentives for lobbying to weaken capital regulation vanish, because otherwise gains in the form of higher returns on risky investments would be outweighed by excessive financial risks due to laxer regulation.
- Lobbying for laxer regulation is warranted if bankers only consider the direct effects on bank returns since, in that case, risks incurred by the society as a whole due to excessive risk-taking are neglected.
On Banking Regulation and Lobbying
Authors: Hans Gersbach, Stylianos Papageorgiou
From: ETH Zurich, University of Cyprus