Market-Based Lobbying: Evidence from Advertising Spending in Italy

48 Pages Posted: 2 Jun 2014

See all articles by Stefano DellaVigna

Stefano DellaVigna

University of California, Berkeley; National Bureau of Economic Research (NBER)

Ruben Durante

Catalan Institution of Research and Advanced Studies (ICREA); Universitat Pompeu Fabra, Department of Economics and Business, Students

Brian G. Knight

Brown University - Department of Economics; National Bureau of Economic Research (NBER)

Eliana La Ferrara

Bocconi University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: February 2014

Abstract

An extensive literature has studied lobbying by special interest groups. We analyze a novel lobbying channel: lobbying businessmen-politicians through business proxies. When a politician controls a business, firms attempting to curry favors shift their spending towards the politician's business. The politician benefits from increased revenues, and the firms hope for favorable regulation in return. We investigate this channel in Italy where government members, including the prime minister, are not required to divest business holdings. We examine the evolution of advertising spending by firms over the period 1994 to 2009, during which Silvio Berlusconi was prime minister on and off three times, while maintaining control of Italy's major private television network, Mediaset. We predict that firms attempting to curry favor with the government shift their advertising budget towards Berlusconi's channels when Berlusconi is in power. Indeed, we document a significant pro-Mediaset bias in the allocation of advertising spending during Berlusconi's political tenure. This pattern is especially pronounced for companies operating in more regulated sectors, as predicted. Using a model of supply and demand in the advertising market, we estimate one billion euros of extra revenue to Berlusconi's group. We also estimate the expected returns in regulation to politically motivated spenders of similar magnitude, stressing the economic importance of this lobbying channel. These findings provide an additional rationale for rules on conflict of interest.

Keywords: advertising, conflict of interest, lobbying, media

JEL Classification: D22, D72

Suggested Citation

DellaVigna, Stefano and Durante, Ruben and Knight, Brian G. and La Ferrara, Eliana, Market-Based Lobbying: Evidence from Advertising Spending in Italy (February 2014). CEPR Discussion Paper No. DP9813, Available at SSRN: https://ssrn.com/abstract=2444813

Stefano DellaVigna (Contact Author)

University of California, Berkeley ( email )

Economics Department
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Berkeley, CA 94720
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HOME PAGE: http://emlab.berkeley.edu/users/sdellavi/

National Bureau of Economic Research (NBER)

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Ruben Durante

Catalan Institution of Research and Advanced Studies (ICREA) ( email )

P/ Lluis Companys 23
Barcelona, 08010
Spain

Universitat Pompeu Fabra, Department of Economics and Business, Students ( email )

Barcelona
Spain

HOME PAGE: http://www.rubendurante.net

Brian G. Knight

Brown University - Department of Economics ( email )

64 Waterman Street
Providence, RI 02912
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Eliana La Ferrara

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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