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
There are 2 versions of this paper
Political Power and Market Power
Political Power and Market Power
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: Suggested Citation