Institutions of Power

Kevin Lewis

September 15, 2023

Comparing 'responsible party government' in the US and the UK
Gary Cox
Journal of Politics, forthcoming 


Responsible parties are conventionally defined as those capable of announcing their legislative goals and then passing them on the strength of their own members’ votes. In this paper, I consider why UK majority parties have closely approximated these conditions for responsibility since the 1880s, while US majority parties have never approximated them closely. I provide the first systematic evidence on when the British opposition began to offer across-the-board opposition to the government’s agenda and when the government became able to pass bills using only its own members’ votes. I also explore the role that leaders’ control of the legislative agenda and their followers’ nominations played in these developments. I attribute US parties’ inability to mimic their British counterparts to different costs of defending bill passage coalitions against “weakest-link” attacks.

The Curiouser and Curiouser Case of Carried Interest
Edward McCaffery & Darryll Keith Jones
Arizona Law Review, forthcoming 


In late July 2022, as the Inflation Reduction Act was being finalized, a provision limiting the carried interest preference, which allows billionaire hedge fund managers to qualify for the long-term capital gains rate on their highly lucrative “carry,” was scrapped. This continued a string of defeats for sensible policy reform dating back at least as far as Victor Fleischer’s Congressional testimony in 2007 and his seminal Two and Twenty law review article. The usual special interest view of politics took the blame for the inertia. In this Article, we explain how a “reverse Mancur Olson” or ex ante rent extraction model better explains what has -- and has not -- been going on. Lawmakers of both political parties have a financial interest in “stringing along” carried interest and similar issues, in order to extract rents in the form of campaign contributions. We illustrate how over the past fifteen years, Presidents and Congressional members of both parties have played this game, preserving the appearance of wanting to end the preference while maintaining the reality of doing nothing. The phenomenon not only makes sensible law reform difficult by keeping both rents and rent-extracting mechanisms in the law, but it also contributes to the overwhelming incumbency advantage that prevents more dynamic democratic turnover and change.

Misallocation in Production Networks across Space: The Role of Firm Lobbying in the US
Xiangyu Shi
Yale Working Paper, July 2023 


In this paper, I examine the role of firm lobbying in shaping the structure of US production networks, and its implications for misallocation in production networks across space. Using several instrumental variable strategies, I establish that firms that lobby have more buyers and suppliers, and such effects are more pronounced for larger firms, firms subject to more regulations, and distant buyer-supplier connections. Further examination suggests that lobbying reduces misallocation in production networks, which is especially effective in the presence of distortive regulations. A novel quantitative model of spatial production networks indicates that lobbying reduces misallocation by 22%, and explains 3.2% of the gain of aggregate productivity during 1999-2020. A model without production networks or space delivers quantitatively and even qualitatively different results.

The Revolving Door and Regulatory Enforcement: Firm-level Evidence on Tax Rates and Tax Audits
Benjamin Egerod
Journal of Politics, forthcoming 


Can firms extract policy concessions by hiring former Members of Congress (MCs)? I argue that firms use personnel with a background in politics to keep regulators away. With an empirical focus on tax enforcement, I present comprehensive evidence that firms can use MCs to avoid regulatory enforcement. Hiring MCs decreases firm-level tax rates -- highly connected MCs who served on committees responsible for tax policy produce the largest decrease. Leveraging a novel hand-coded dataset of tax audits, I show that hiring an MC is associated with a lower probability of being audited. The change in enforcement has important consequences: Hiring an MC is associated with smaller fines and with uncertain tax positions being automatically accepted due to lapses in the statute of limitations. This indicates that rules are enforced differently against politically connected firms, shedding new light on the role of connections in the American political economy.

Lobbying for government appropriations
Christian Cox
RAND Journal of Economics, Fall 2023, Pages 443-483 


This article investigates the effect of lobbying on government contract allocation. I consider how lobbying affects both total contract spending and the distribution of contracts between firms. I solve a novel contest model which incorporates these two effects, and then I structurally estimate it using a panel of federal contractors. The results suggest that lobbying increases contract spending by $8.837 billion (3.22%) per year. However, its effects on the observed contract distribution and firm revenues are relatively small. Lastly, I find that increasing competition in procurement generally results in less lobbying.

Political Geography and Firm Strategies: How Electoral Competition Influences Local Job Creation
James Bisbee & Hye Young You
Journal of Politics, forthcoming 


Among the many promises made by politicians to their constituents, job creation is universal. Do firms strategically use job creation to exert influence? We take this question to the universe of firms in the United States between 1997 and 2018, linking each subsidiary to a congressional district. We find that firms open subsidiaries in more competitive districts, suggesting that firms employ politicians’ constituents as a political strategy to build ties with vulnerable legislators. These patterns are also consistent with electorally insecure politicians exerting more effort to attract firms. Unlike other tools of political influence available to a firm, such as campaign contributions and lobbying, job creation is constrained by geography and time. We show that these patterns exist only for firms in geographically flexible industries, that local job creation increases a politician’s electoral survival, and that subsidiary investments are correlated with longer tenures on valuable congressional committees.

The Conditional Lawmaking Benefits of Party Faction Membership in Congress
Andrew Clarke, Craig Volden & Alan Wiseman
Political Research Quarterly, forthcoming 


Does joining a party faction in Congress enhance or undermine a member’s lawmaking effectiveness? Prior research suggests that factions can help members electorally in signaling their distinct ideological positions to potential political supporters. By contrast, we examine the nine largest ideological caucuses over the past quarter century to test three hypotheses about the conditional lawmaking benefits of faction membership: (1) that benefits from faction membership are limited to those in the minority party; (2) that members of ideologically centrist factions gain the greatest benefits; and (3) that sizable factions exploit their pivotal positions to help their members achieve legislative victories. We find support for only the first of these three conjectures, consistent with the argument that factions offer valuable resources to those in the minority party and that majority-party leaders counter the proposals arising from their own party’s factions. The fact that faction membership offers no significant lawmaking benefit to majority-party legislators challenges conventional wisdom.

The Composition of Descriptive Representation
John Gerring, Connor Jerzak & Erzen Öncel
American Political Science Review, forthcoming 


How well do governments represent the societies they serve? A key aspect of this question concerns the extent to which leaders reflect the demographic features of the population they represent. To address this important issue in a systematic manner, we propose a unified approach for measuring descriptive representation. We apply this approach to newly collected data describing the ethnic, linguistic, religious, and gender identities of over fifty thousand leaders serving in 1,552 political bodies across 156 countries. Strikingly, no country represents social groups in rough proportion to their share of the population. To explain this shortfall, we focus on compositional factors -- the size of political bodies as well as the number and relative size of social groups. We investigate these factors using a simple model based on random sampling and the original data described above. Our analyses demonstrate that roughly half of the variability in descriptive representation is attributable to compositional factors.

Media fabrication of corruption and the quality of the political class: The case of Italy
Giovanni Pittaluga, Elena Seghezza & Pierluigi Morelli
European Journal of Political Economy, forthcoming 


Since the global financial crisis of 2008, the level of perceived corruption in Italy has risen markedly, diverging significantly from the perceived corruption of other high-income countries and from the corruption as experienced. We propose that newspapers, in order to maximize their profits, have given directed emphasis to episodes of political corruption, which has contributed to the increase in perceived corruption. The consequence has been loss of parliament's credibility and a deterioration in the quality of the Italian political class.

Gradual Franchise Extensions and Government Spending in Nineteenth-Century England
Jonathan Chapman
Journal of Politics, forthcoming 


This paper investigates the effect of extending the franchise on government spending on public goods in nineteenth-century England and Wales. The effect of franchise extension is identified by exploiting extensive regional and temporal variation in the right to vote in municipal elections between 1867 and 1900. Semi-parametric regressions show robust evidence of an inverted-U-shaped relationship: extending the right to vote from the rich to the middle class led to increased spending, but further franchise extensions -- beyond around 50% of the adult male population -- led to lower expenditure. Further, government spending was lower in towns where the poor were enfranchised by national reforms. A simple model shows that the inverted-U-relationship can be explained by the trade-offs between public spending and private consumption faced by poor voters. These results suggest that enfranchising the poor may lead to smaller government, in contrast to the predictions of many theoretical models.

U.S. Agency Growth Aspirations and the Effect of Ideological Extremism 
Susan Webb Yackee
Public Administration Review, forthcoming


Does ideological extremism curb a public agency's desire to grow? This article theorizes that changes in the political environment affect a public agency leader's growth aspirations. Specifically, increased ideological extremism across an agency's elected principals leads an agency leader to be more cautious and less growth-minded. The assessments of over 10,000 American state agency leaders are studied across 11 points in time from 1964 to 2018 and matched to data capturing the leader's ideological environment. Agency leaders, who face heightened extremism from elected state officials, are found to report a reduced interest in future growth. The results are strongest during periods of divided government, which may occur because the signal sent from greater extremism is more useful to agency leaders during these periods. When aggregated across thousands of agencies, the article's findings imply a driver of slower growth in the future size and scope of government.

Social Media Effects on Public Trust in the European Union
Osman Sabri Kiratli
Public Opinion Quarterly, forthcoming


This paper scrutinizes the effect of social media use on institutional trust in the European Union (EU) among European citizens. Fixed-effects regression models on data from the Eurobarometer survey conducted in 2019, the year of the most recent European Parliament (EP) elections, demonstrate that higher social media use is associated with lower trust in the EU. More importantly, social media usage habits exert particularly detrimental effects in regions with wider and faster internet connections. In such high-information environments, those who more frequently use online social networks, tend to trust those networks, and receive information on EU affairs from these networks have less faith in the EU compared to those in regions with lower-quality internet access. In contrast, in regions with lower broadband access, receiving EU information from social media fosters political trust.


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