The Impact of Money in Politics on Labor and Capital: Evidence from Citizens United v. FEC

Abstract

We examine whether corporate money in politics benefits or hurts labor using the 2010 Supreme Court ruling Citizens United, which rendered bans on political election spending unconstitutional. In difference-in-difference analyses, affected states experience increases in both capital and labor income relative to unaffected states. We find evidence consistent with increased political spending spurring political competition and the adoption of pro-growth policies. These policies benefit a broader set of constituents as we find a broad-based increase in labor income. Affected states see increased political turnover and reduced regulatory burdens. The economic effects are stronger among ex-ante politically inactive and younger firms.

Keywords: Labor and finance, Citizens United, money in politics, political spending, labor income, wages, earnings, capital income, profits, political power

JEL Classification: D33, D72, E25, G03, G38, J30, P16