Doing More for Less? New Evidence on Lobbying and Government Contracts

48 Pages Posted: 27 Aug 2019

See all articles by Senay Agca

Senay Agca

George Washington University - School of Business, Department of Finance

Deniz Igan

International Monetary Fund (IMF) - Financial Studies Division

Fuhong Li

George Washington University

Prachi Mishra

International Monetary Fund (IMF) - Research Department

Date Written: August 2019

Abstract

Why do firms lobby? This paper exploits the unanticipated sequestration of federal budget accounts in March 2013 that reduced the availability of government funds disbursed through procurement contracts to shed light on this question. Following this event, firms with little or no prior exposure to the federal accounts that experienced cuts reduced their lobbying spending. In contrast, firms with a high degree of exposure to the cuts maintained and even increased their lobbying spending. This suggests that, when the same number of contractors competed for a piece of a reduced pie, the more affected firms likely intensified their lobbying efforts to distinguish themselves from the others and improve their chances of procuring a larger share of the smaller overall. These findings are stronger in government-dependent sectors and when there is intense competition. The evidence is more consistent with a rent-seeking explanation for lobbying.

Keywords: National income accounts, National income accounting, Government expenditures, Industry, Trade policy, Political connections, lobbying, rent seeking, government spending, procurement, sequestration, post-event, industry concentration, full sample, federal contract

JEL Classification: P16, D72, E01, M41, G21, P24, H83

Suggested Citation

Agca, Senay and Igan, Deniz and Li, Fuhong and Mishra, Prachi, Doing More for Less? New Evidence on Lobbying and Government Contracts (August 2019). IMF Working Paper No. 19/172. Available at SSRN: https://ssrn.com/abstract=3442886

Senay Agca (Contact Author)

George Washington University - School of Business, Department of Finance ( email )

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Deniz Igan

International Monetary Fund (IMF) - Financial Studies Division ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Fuhong Li

George Washington University ( email )

2121 I Street NW
Washington, DC 20052
United States

Prachi Mishra

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

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