The Lion’s Share: Evidence from Federal Contracts on the Value of Political Connections

Åženay AÄŸca and Deniz Igan

No 17708, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the role of political connections in receiving federal funds during an unexpected surge in government defense spending. While the data do not allow identification of a causal link, the analysis uncovers that politically connected firms were awarded larger amounts in federal contracts when available funds increased. Specifically, firms that lobbied received around one third more in the amount of defense contracts compared to those that did not lobby. Similar evidence holds for campaign contributions and board connections. The increase in the amount of contracts obtained is observed primarily for firms that had limited ability to efficiently support Pentagon efforts, and when contracts received less scrutiny. Between political connections and merit-based channels in government contracting, the results mainly, but not exclusively, support the first channel.

Keywords: Lobbying; Campaign contributions; Political connections; Government spending; Procurement (search for similar items in EconPapers)
JEL-codes: D72 G38 H57 H61 P16 (search for similar items in EconPapers)
Date: 2022-11
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