Buying the Vote? The Economics of Electoral Politics and Small Business Loans

61 Pages Posted: 12 Oct 2020 Last revised: 2 Jul 2021

See all articles by Ran Duchin

Ran Duchin

Boston College - Carroll School of Management

John Hackney

University of South Carolina - Department of Finance

Date Written: July 2, 2021

Abstract

We study the effect of electoral politics on government small business lending, employment, and business formation. We construct novel measures of electoral importance capturing swing and base voters using data from Facebook ad spending, independent political expenditures, the Cook Political Report, and campaign contributions. We find that businesses in electorally important states, districts, and sectors receive more loans following the onset of the COVID-19 crisis, controlling for funding demand and both health and economic conditions. Estimates from survey and observational data show that electoral politics and the allocation of government funds affect employment, small business activity, and business applications. Data from political prediction markets show that the allocation of loans to electorally important states is associated with higher returns on shares betting that Donald Trump would win the election in those states.

Keywords: Employment, Government expenditures, Stimulus, Business applications, COVID-19

JEL Classification: G21, G28, G32, G38

Suggested Citation

Duchin, Ran and Hackney, John, Buying the Vote? The Economics of Electoral Politics and Small Business Loans (July 2, 2021). Available at SSRN: https://ssrn.com/abstract=3708462 or http://dx.doi.org/10.2139/ssrn.3708462

Ran Duchin

Boston College - Carroll School of Management ( email )

140 Commonwealth Avenue
Chestnut Hill, MA 02467
United States

John Hackney (Contact Author)

University of South Carolina - Department of Finance ( email )

1014 Greene Street
Columbia, SC 29208
United States

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