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The Effects of Firms’ Lobbying on Resource Misallocation

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  • Federico Huneeus
  • In Song Kim

Abstract

We study the effect of firms’ lobbying activities on the misallocation of resources in the U.S. through the distortion of firm size. To quantify the macroeconomic consequences of corporate political influence, we develop a multi-sector heterogeneous firm model with endogenous lobbying. We estimate our model using a novel firm-level lobbying dataset, while leveraging the variation in the returns to lobbying expenditures through changes in the value of firms’ connections to politicians. Finally, we structurally estimate the model and show that eliminating lobbying increases aggregate productivity in the U.S. by 6 percent.

Suggested Citation

  • Federico Huneeus & In Song Kim, 2021. "The Effects of Firms’ Lobbying on Resource Misallocation," Working Papers Central Bank of Chile 920, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:920
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_920.pdf
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    References listed on IDEAS

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    1. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
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    Cited by:

    1. Chen, Ying & Zápal, Jan, 2022. "Sequential vote buying," Journal of Economic Theory, Elsevier, vol. 205(C).
    2. Michael Klein & Yibai Yang, 2024. "Blocking Patents, Rent Protection and Economic Growth"," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 52, pages 1-20, April.

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