Can Controls Curb Political Capture? Evidence from Patenting

Abstract

Theories of congressional dominance contend that regulatory agencies can be captured by the politicians that oversee them. We examine whether control systems and transparency constrain such capture. Using the United States Patent and Trademark Office (USPTO) as a setting, we begin by providing causal evidence of political capture. Patent applications are more likely to be approved when submitted by firms with powerful congressional representation, even though the granted patents are of lower quality. We then document that limits on congressional authority over the USPTO's financing, via the America Invents Act of 2011, mitigates political capture. We also exploit patent examiner departures (and the reassignment of patent applications to a new examiner) to show that public transparency about the identity of a patent examiner constrains political capture. Our study provides novel insights about mechanisms that can constrain distortions in the regulatory process.

Keywords: Innovation, Political Economy, Regulatory Design, Congress, Transparency, Controls

JEL Classification: G38, H11, L51, M41, M48