Return on Political Investment in the American Jobs Creation Act of 2004

50 Pages Posted: 14 Dec 2014

See all articles by Hui Chen

Hui Chen

University of Zurich

Katherine Gunny

University of Colorado at Denver

Karthik Ramanna

University of Oxford - Blavatnik School of Government

Date Written: December 3, 2014

Abstract

Prior literature raises a “puzzle” of high rates of return on corporate political investment, but evidence for this puzzle is largely descriptive in nature. We exploit the setting of the American Jobs Creation Act’s passage in 2004 to provide more robust estimates of political returns based on instrumentation in a two-stage regression model. We find for the median sample firm that an increase of $1 million in lobbying spending is associated with about $32.35 million in taxes saved. These estimates, while consistent with a high-returns “puzzle,” are nearly an order of magnitude lower than those previously reported via descriptive methods.

Keywords: lobbying, multinationals, repatriations, returns, taxes

JEL Classification: D72, F23, G18, H25, M41

Suggested Citation

Chen, Hui and Gunny, Katherine and Ramanna, Karthik, Return on Political Investment in the American Jobs Creation Act of 2004 (December 3, 2014). Harvard Business School Accounting & Management Unit Working Paper No. 15-050, Available at SSRN: https://ssrn.com/abstract=2537079 or http://dx.doi.org/10.2139/ssrn.2537079

Hui Chen

University of Zurich ( email )

Plattenstrasse 14
Zurich, CH-8032
Switzerland

Katherine Gunny

University of Colorado at Denver ( email )

Box 173364
1250 14th Street
Denver, CO 80217
United States

Karthik Ramanna (Contact Author)

University of Oxford - Blavatnik School of Government ( email )

Radcliffe Observatory Quarter
Oxford, Oxfordshire OX2 6GG
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
329
Abstract Views
3,448
rank
103,430
PlumX Metrics