It’s a Sweetheart of a Deal: Political Connections and Corporate- Federal Contracting

Stephen P. Ferris, Reza Houston and David Javakhadze

No 2016-WP-03, NFI Working Papers from Indiana State University, Scott College of Business, Networks Financial Institute

Abstract: We examine whether political connections measured by political contributions influence the choice of terms included in government contracts awarded to firms. We construct an index of four “sweetheart” contract terms and find that firms making larger political contributions more frequently have these favorable terms included in their contracts. We also find that political contributions have explanatory power for contract design after controlling for lobbying, negotiation power, and the employment of former government employees. These results are robust to alternative model specifications, different estimation techniques, various variable measurements, and adjustments for possible endogeneity.

Keywords: contracting; political connections (search for similar items in EconPapers)
JEL-codes: G32 G34 G38 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2016-09, Revised 2018-08
New Economics Papers: this item is included in nep-bec, nep-cfn, nep-cta and nep-pol
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