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Does Private Money Buy Public Policy? Campaign Contributions and Regulatory Outcomes in Telecommunications

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  • Rui J. P. de Figueiredo
  • Geoff Edwards

Abstract

"To what extent can market participants affect the outcomes of regulatory policy? In this paper, we study the effects of one potential source of influence-campaign contributions-from competing interests in the local telecommunications industry, on regulatory policy decisions of state public utility commissions. Our work is unique in that we test the effects of campaign contributions on measurable policy outcomes. This stands in stark relief against most of the existing literature, which examines potentially noisier measures of policy outcomes-such as the roll-call votes of legislators, to examine how private money may influence public policy. By moving to more direct measures of policy effects, and using a unique new dataset, we find, in contrast to much of the literature on campaign contributions, that there is a significant effect of private money on regulatory outcomes. This result is robust to numerous alternative model specifications. We also assess the extent of omitted variable bias that would have to exist to obviate the estimated result. We find that for our result to be spurious, omitted variables would have to explain more than five times the variation in the mix of private money as is explained by the variables included in our analysis. We consider this to be very unlikely." Copyright 2007, The Author(s) Journal Compilation (c) 2007 Blackwell Publishing.

Suggested Citation

  • Rui J. P. de Figueiredo & Geoff Edwards, 2007. "Does Private Money Buy Public Policy? Campaign Contributions and Regulatory Outcomes in Telecommunications," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 16(3), pages 547-576, September.
  • Handle: RePEc:bla:jemstr:v:16:y:2007:i:3:p:547-576
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    References listed on IDEAS

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    Cited by:

    1. Flavio Menezes & Magnus Söderberg & Miguel Santolino, 2012. "Regulatory behaviour under threat of court reversal," Discussion Papers Series 472, School of Economics, University of Queensland, Australia.
    2. Robert C. Seamans, 2012. "Fighting City Hall: Entry Deterrence and Technology Upgrades in Cable TV Markets," Management Science, INFORMS, vol. 58(3), pages 461-475, March.
    3. Yörük Bariş K., 2015. "Do Charitable Subsidies Crowd Out Political Giving? The Missing Link between Charitable and Political Contributions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 15(1), pages 1-29, January.
    4. McKay Amy, 2010. "The Effects of Interest Groups' Ideology on Their PAC and Lobbying Expenditures," Business and Politics, De Gruyter, vol. 12(2), pages 1-23, August.
    5. Panova Elena, 2011. "Electoral Endorsements and Campaign Contributions," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-25, February.
    6. Fernández, Zulima & Usero, Belén, 2010. "Considerations on "Research on non-market actions: A commentary essay"," Journal of Business Research, Elsevier, vol. 63(1), pages 1-2, January.

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