Political Power and Market Power

Bo Cowgill, Andrea Prat and Tommaso Valletti

No 33255, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Brandeis (1914) hypothesized that firms with market power will also attempt to gain political power. To explore this hypothesis empirically, we combine data on mergers with data on lobbying expenditures and campaign contributions in the US from 1999 to 2017. We pursue two distinct empirical approaches: a panel event study and a differential exposure design. Both approaches indicate that mergers are followed by large and persistent increases in lobbying activity, both by individual firms and by industry trade associations. There is also weaker evidence for an association of mergers with campaign contributions (PACs). We also find that mergers impact the extensive margin of political activity, for example, by impacting companies’ choice to establish their first in-house lobbying teams and/or first corporate PAC. We interpret these results within an oligopoly model augmented with endogenous regulation and lobbying.

JEL-codes: L19 (search for similar items in EconPapers)
Date: 2024-12
New Economics Papers: this item is included in nep-com, nep-ind, nep-pol and nep-reg
Note: IO POL PR
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Related works:
Working Paper: Political Power and Market Power (2023)
Working Paper: Political Power and Market Power (2022)
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