Abstract

http://ssrn.com/abstract=1426106
 
 

References (53)



 
 

Citations (16)



 


 



Do Powerful Politicians Cause Corporate Downsizing?


Lauren Cohen


Harvard Business School; National Bureau of Economic Research (NBER)

Joshua D. Coval


Harvard Business School - Finance Unit; National Bureau of Economic Research (NBER)

Christopher J. Malloy


Harvard Business School; National Bureau of Economic Research (NBER)

March 16, 2010


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 behaviors follow both Senate and House committee chair changes, 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.

Number of Pages in PDF File: 47

Keywords: government spending, seniority, corporate behavior, investment, earmarks

JEL Classification: E13, E62, G31

working papers series





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Date posted: June 30, 2009 ; Last revised: July 24, 2010

Suggested Citation

Cohen, Lauren and Coval, Joshua D. and Malloy, Christopher J., Do Powerful Politicians Cause Corporate Downsizing? (March 16, 2010). Available at SSRN: http://ssrn.com/abstract=1426106 or http://dx.doi.org/10.2139/ssrn.1426106

Contact Information

Lauren Cohen
Harvard Business School ( email )
Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Joshua D. Coval
Harvard Business School - Finance Unit ( email )
Boston, MA 02163
United States
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Christopher J. Malloy (Contact Author)
Harvard Business School ( email )
Soldiers Field Road
Baker Library 277
Boston, MA 02163
United States
617-495-4383 (Phone)
National Bureau of Economic Research (NBER) ( email )
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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