 Do Powerful Politicians Cause Corporate Downsizing?Lauren Cohen, Joshua D. Coval and Christopher Malloy () No 15839, NBER Working Papers from National Bureau of Economic Research, Inc Abstract: This paper employs a new empirical approach for identifying the impact of government spending on the private sector. Our key innovation is to use changes in congressional committee chairmanship as a source of exogenous variation in state-level federal expenditures. In doing so, we show that fiscal spending shocks appear to significantly dampen corporate sector investment and employment activity. These corporate reactions follow both Senate and House committee chair changes, are present among large and small firms and within large and small states, are partially reversed when the congressman resigns, and are most pronounced among geographically-concentrated firms. The effects are economically meaningful and the mechanism - entirely distinct from the more traditional interest rate and tax channels - suggests new considerations in assessing the impact of government spending on private sector economic activity. JEL-codes: E13 E62 G31 (search for similar items in EconPapers) Published as “Do Powerful Politicians Cause Corporate Downsizing?” (with Joshua Coval and Christopher Malloy), 2011. Journal of Political Economy 119, 1015-1060. Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:15839 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC. |
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