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Market-Based Lobbying: Evidence from Advertising Spending in Italy

Stefano DellaVigna (), Ruben Durante (), Eliana La Ferrara () and Brian Knight

Sciences Po publications from Sciences Po

Abstract: We analyze a novel lobbying channel: firms attempting to influence businessmen- politicians through business proxies. In particular, when a politician controls a business, firms shift their spending towards the politician's business in the hopes of securing favorable regulation. We investigate this channel in Italy where government officials are not required to divest business holdings. We examine the evolution of advertising spending by firms between 1993 and 2009, a period in which Silvio Berlusconi was prime minister three separate times, while maintaining control of Italy's major private television network, Mediaset. We develop a theoretical model of this channel and, in the context of this model, hypothesize that firms shift their advertising budget towards Mediaset when Berlusconi is in power and that this shift is particularly pronounced for regulated rms. Consistent with these hypotheses, we document a significant pro Mediaset bias in the allocation of advertising spending during Berlusconi's political tenure, and this pattern is especially pronounced for companies operating in more regulated sectors. Using these estimates, we estimate that Mediaset profits increased by one billion euros during this period and that regulated firms anticipated sizeable returns, stressing the economic importance of this lobbying channel. These findings provide an additional rationale for rules on conflict of interest.

Keywords: Lobbying; Advertising (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-pol
Date: 2014
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Published in American Economic Journal: Applied Economics, 2014, vol. Forthcoming

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Related works:
Journal Article: Market-Based Lobbying: Evidence from Advertising Spending in Italy (2016) Downloads
Working Paper: Market-based Lobbying: Evidence from Advertising Spending in Italy (2014) Downloads
Working Paper: Market-based Lobbying: Evidence from Advertising Spending in Italy (2013) Downloads
Working Paper: Market-based Lobbying: Evidence from Advertising Spending in Italy (2013) Downloads
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