Lobbying as a Source of Rent Seeking: Clarification of the Relationship Between Corporate Lobbying and Firm Tax Benefits

35 Pages Posted: 12 Jan 2021 Last revised: 24 May 2021

See all articles by Seth Carter

Seth Carter

Indiana University Bloomington

Date Written: November 26, 2020

Abstract

This paper measures and analyzes explicit returns to United States firms through lobbying efforts and motivated expenditures at the federal level. The dependent variables of interest in this analysis are unrecognized tax benefits and adjusted marginal tax rates. Using a combination of multiple linear regression and system/dynamic generalized method of moments analysis on a panel of firm level data, I find statistically significant and economically substantial beneficial returns to the dependent variables for firms upon increase in annual lobbying expenditures, particularly when such firms are more profitable. New contributions to the empirical investigation of lobbying include the use of previously unexplored and updated variables of interest for firms and public policy considerations; modeling and computation successfully addressing endogeneity, reverse causality, and autocorrelation concerns in prior quantitative research; updated time frames for observed data; and improved robustness checks of models to demonstrate the persistence of computational results. The implications of the results for theoretical explanations of lobbying, perspective on U.S. lobbying, and possible implications for policy are investigated and found to offer support for public choice analyses of political behavior in that the new results are consistent with models explaining lobbying primarily as a result of self-interested behavior and rent-seeking efforts from agents.

Keywords: GMM, Regression, Econometrics, Semiparametric, Applied, Policy, Strategy

JEL Classification: H25, C23, D72

Suggested Citation

Carter, Seth, Lobbying as a Source of Rent Seeking: Clarification of the Relationship Between Corporate Lobbying and Firm Tax Benefits (November 26, 2020). Available at SSRN: https://ssrn.com/abstract=3738377 or http://dx.doi.org/10.2139/ssrn.3738377

Seth Carter (Contact Author)

Indiana University Bloomington ( email )

Dept of Economics
100 South Indiana Ave.
Bloomington, IN 47405
United States
812-498-5351 (Phone)

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