Political Power and Market Power

Columbia Business School Research Paper No. 101

CEPR Discussion Paper No. DP17178

72 Pages Posted: 16 Mar 2023 Last revised: 28 Mar 2023

See all articles by Bo Cowgill

Bo Cowgill

Columbia University - Columbia Business School

Andrea Prat

Columbia University - Columbia Business School, Finance; Centre for Economic Policy Research (CEPR)

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Date Written: March 16, 2023

Abstract

We study the link between political influence and industrial concentration. We present a joint model of political influence and market competition: an oligopoly lobbies the government over regulation, and competes in the product market shaped by this influence. We show broad conditions for mergers to increase lobbying, both on the intensive margin and the extensive margin. We combine data on mergers with data on lobbying expenditures and campaign contributions in the US from 1999 to 2017. We document a positive association between mergers and lobbying, both by individual firms and by industry trade associations. Mergers are also associated with extensive margin changes such as the formation of in-house lobbying teams and corporate PACs. We find some evidence for a positive association between mergers and higher campaign contributions.

Keywords: Political influence, lobbying, mergers, industrial concentration.

JEL Classification: D72, L51, G34, L10

Suggested Citation

Cowgill, Bo and Prat, Andrea and Valletti, Tommaso M., Political Power and Market Power (March 16, 2023). Columbia Business School Research Paper No. 101, CEPR Discussion Paper No. DP17178, Available at SSRN: https://ssrn.com/abstract=4390776 or http://dx.doi.org/10.2139/ssrn.4390776

Bo Cowgill (Contact Author)

Columbia University - Columbia Business School ( email )

3022 Broadway
New York, NY 10027
United States

Andrea Prat

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Tommaso M. Valletti

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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