Flexing Muscle: Corporate Political Expenditures as Signals to the Bureaucracy

Sanford C. Gordon and Catherine Hafer

American Political Science Review, 2005, vol. 99, issue 2, 245-261

Abstract: Regulatory agencies impose costs and benefits tailored to individual firms through their discretionary enforcement activities. We propose that corporations use political expenditures in part to “flex their muscles” to regulators and convey their willingness to fight an agency's specific determinations in the political arena. Because the signaling function of political expenditures is strategically complex, we derive a formal model wherein we demonstrate the existence of an equilibrium in which (1) large political donors are less compliant than smaller ones, but the bureaucracy monitors them less, and (2) firms with publicly observable problems reduce their political expenditures. We test the empirical implications of the model using plant-level data from the Nuclear Regulatory Commission on the inspection of 63 privately operated nuclear power plants and the political expenditures of their parent companies. We find strong evidence for the first prediction and qualified support for the second.

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (42)

Downloads: (external link)
https://www.cambridge.org/core/product/identifier/ ... type/journal_article link to article abstract page (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cup:apsrev:v:99:y:2005:i:02:p:245-261_05

Access Statistics for this article

More articles in American Political Science Review from Cambridge University Press Cambridge University Press, UPH, Shaftesbury Road, Cambridge CB2 8BS UK.
Bibliographic data for series maintained by Kirk Stebbing ().