Foreign Influence in US Politics

62 Pages Posted: 23 Mar 2022 Last revised: 25 Mar 2022

See all articles by Marco Grotteria

Marco Grotteria

London Business School

Max Miller

University of Pennsylvania, The Wharton School, Finance Department

S Lakshmi Naaraayanan

London Business School

Date Written: March 15, 2022

Abstract

We provide the first large-sample evidence of foreign influence in US politics, showing that meetings between foreign countries and legislators affect government resource allocation directly for countries and indirectly for firms. To do so, we introduce a comprehensive dataset of date-stamped meetings between foreign countries and individual US legislators, spanning 2000 to 2018 and covering 146 countries, 1,200 US legislators, and 10 Congresses. From this new dataset, three facts emerge: (1) foreign countries lobby most intensely for trade and the economy, (2) meetings are positively related to legislator lawmaking effectiveness and past employment connections with lobbyists while they are unrelated to political ideology, and (3) foreign countries maintain connections with all legislators even after they depart from committees that are important in allocating public resources. Using legislator deaths as a shock to connections, our estimates imply a per-meeting direct loss of US$5.7 million to countries in foreign aid and indirect loss to foreign firms in state subsidies and government contracts amounting to US$250,000. Overall, these results highlight the significance of foreign influence in the US and present new observations to guide work in economics, public finance, and political science.

Keywords: Political economy, public finance, political connections, subsidies, foreign lobbying

JEL Classification: D72, H25, P16

Suggested Citation

Grotteria, Marco and Miller, Max and Naaraayanan, S Lakshmi, Foreign Influence in US Politics (March 15, 2022). Jacobs Levy Equity Management Center for Quantitative Financial Research Paper, Available at SSRN: https://ssrn.com/abstract=4058658 or http://dx.doi.org/10.2139/ssrn.4058658

Marco Grotteria

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

HOME PAGE: http://sites.google.com/site/marcogrotteria/home

Max Miller (Contact Author)

University of Pennsylvania, The Wharton School, Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

S Lakshmi Naaraayanan

London Business School ( email )

Sussex Place
Regent's Park
London NW1 4SA
United Kingdom

HOME PAGE: http://www.lakshmin.com

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