Doing More for Less? New Evidence on Lobbying and Government Contracts

By Senay Agca, Deniz O Igan, Fuhong Li, Prachi Mishra

August 9, 2019

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Senay Agca, Deniz O Igan, Fuhong Li, and Prachi Mishra. Doing More for Less? New Evidence on Lobbying and Government Contracts, (USA: International Monetary Fund, 2019) accessed November 23, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Why do firms lobby? This paper exploits the unanticipated sequestration of federal budget accounts in March 2013 that reduced the availability of government funds disbursed through procurement contracts to shed light on this question. Following this event, firms with little or no prior exposure to the federal accounts that experienced cuts reduced their lobbying spending. In contrast, firms with a high degree of exposure to the cuts maintained and even increased their lobbying spending. This suggests that, when the same number of contractors competed for a piece of a reduced pie, the more affected firms likely intensified their lobbying efforts to distinguish themselves from the others and improve their chances of procuring a larger share of the smaller overall. These findings are stronger in government-dependent sectors and when there is intense competition. The evidence is more consistent with a rent-seeking explanation for lobbying.

Subject: Asset and liability management, Asset valuation, Competition, Expenditure, Financial markets

Keywords: Asset valuation, Competition, Firm level, Firms switch, Government spending, Industry concentration, Level competition, Lobbying, Natural logarithm, Political connections, Procurement, Rent seeking, Sequester ratio, Sequestered firm, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/172
Stock No:

WPIEA2019172
ISBN:

9781498315241
ISSN:

1018-5941

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