Return on political investment in the American Jobs Creation Act of 2004

Hui Chen (), Katherine Gunny () and Karthik Ramanna ()
Additional contact information
Hui Chen: University of Zürich
Katherine Gunny: University of Colorado at Boulder
Karthik Ramanna: Harvard Business School, Accounting and Management Unit

No 15-050, Harvard Business School Working Papers from Harvard Business School

Abstract: Prior literature raises a "puzzle" of high rates of return on corporate political investment, but evidence for this puzzle is largely descriptive in nature. We exploit the setting of the American Jobs Creation Act's passage in 2004 to provide more robust estimates of political returns based on instrumentation in a two-stage regression model. We find for the median sample firm that an increase of $1 million in lobbying spending is associated with about $32.35 million in taxes saved. These estimates, while consistent with a high-returns "puzzle," are nearly an order of magnitude lower than those previously reported via descriptive methods.

Keywords: lobbying; multinationals; repatriations; returns; taxes (search for similar items in EconPapers)
JEL-codes: D72 F23 G18 H25 M41 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2014-12
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:hbs:wpaper:15-050

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