Hostname: page-component-848d4c4894-wzw2p Total loading time: 0 Render date: 2024-05-19T19:36:55.141Z Has data issue: false hasContentIssue false
  • English
  • Français

Flexing Muscle: Corporate Political Expenditures as Signals to the Bureaucracy

Published online by Cambridge University Press:  08 June 2005

SANFORD C. GORDON  and
CATHERINE HAFER
SANFORD C. GORDON
Affiliation:
New York University
CATHERINE HAFER
Affiliation:
New York University
Get access Rights & Permissions [Opens in a new window]

Abstract

Regulatory agencies impose costs and benefits tailored to individual firms through their discretionary enforcement activities. We propose that corporations use political expenditures in part to “flex their muscles” to regulators and convey their willingness to fight an agency's specific determinations in the political arena. Because the signaling function of political expenditures is strategically complex, we derive a formal model wherein we demonstrate the existence of an equilibrium in which (1) large political donors are less compliant than smaller ones, but the bureaucracy monitors them less, and (2) firms with publicly observable problems reduce their political expenditures. We test the empirical implications of the model using plant-level data from the Nuclear Regulatory Commission on the inspection of 63 privately operated nuclear power plants and the political expenditures of their parent companies. We find strong evidence for the first prediction and qualified support for the second.

Type
ARTICLES
Information
American Political Science Review , Volume 99 , Issue 2 , May 2005 , pp. 245 - 261
Copyright
© 2005 by the American Political Science Association

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Aberbach Joel D. 1990. Keeping a Watchful Eye: The Politics of Congressional Oversight. Washington, DC: Brookings Institution.
Ansolabehere Stephen, James M. Snyder, Jr., and Micky Tripathi. 2002. “Are PAC Contributions and Lobbying Linked? New Evidence from the 1995 Lobby Disclosure Act.” Business and Politics 4 (August): 131– 155.Google Scholar
Ansolabehere Stephen, John M. de Figueiredo, and James M. Snyder Jr. 2003. “Why is There So Little Money in U.S. Politics?” Journal of Economic Perspectives 17 (March): 105– 130.Google Scholar
Ball Richard J. 1995. Interest Groups, Influence, and Welfare. Economics and Politics 7 (July): 119– 146.Google Scholar
Banks Jeffrey S. 1991. Signaling Games in Political Science. Chur, Switzerland: Harwood Academic Press.
Banks Jeffrey S., and Joel Sobel. 1987. “Equilibrium Selection in Signaling Games.” Econometrica 55 (May): 647– 661.Google Scholar
Baron David P. 1989. “Service-Induced Campaign Contributions and the Electoral Equilibrium.” Quarterly Journal of Economics 104 (February): 45– 72.Google Scholar
Beck Nathaniel, and Jonathan N. Katz. 2001. “Throwing out the Baby with the Bathwater: A Comment on Green, Yoon and Kim.” International Organization 55 (June): 487– 495.Google Scholar
Bernstein Marver. 1955. Regulating Business by Independent Commission. Princeton, NJ: Princeton University Press.
Bound John, David A. Jaeger, and Regina M. Baker. 1995. “Problems with Instrumental Variables Estimation when the Correlation Between the Instruments and the Endogenous Explanatory Variable is Weak.” Journal of the American Statistical Association 90 (June): 443– 450.Google Scholar
Chandrasekaran Rajiv. “Microsoft Lobby Weighs In; Firm's Washington Strategy Pays Off in Hill Support.” Washington Post, November 11w, 1999, sec. ENovember 11.
Endersby James W., and Michael C. Munger. 1992. “The Impact of Legislator Attributes on Union PAC Campaign Contributions.” Journal of Labor Research 13 (Winter), 79– 97.Google Scholar
Fenno Richard F. 1966. The Power of the Purse: Appropriations Politics in Congress. Boston: Little, Brown and Co.
Freeman J. Leiper. 1965. The Political Process. New York: Random House.
Gormley William T. 1979. “A Test of the Revolving Door Hypothesis at the FCC.” American Journal of Political Science 23 (November): 665– 683.Google Scholar
Grier Kevin B., Michael C. Munger, and Brian E. Roberts. 1994. “The Determinants of Industry Political Activity, 1978–1986.” American Political Science Review 88 (December): 911– 926.Google Scholar
Grossman Gene, and Elhanan Helpman. 1994. “Protection for Sale.” American Economic Review 84 (December): 1335– 1355.Google Scholar
Grossman Gene, and Elhanan Helpman. 2001. Special Interest Politics. Cambridge, MA: MIT Press.
Hall Richard L., and Frank W. Wayman. 1990. “Buying Time: Moneyed Interests and the Mobilization of Bias in Congressional Committees.” American Political Science Review 84 (September): 797– 820.Google Scholar
Honohan Patrick, and Daniela Klingebiel. 2000. “Controlling Fiscal Costs of Banking Crises.” World Bank working paper.
Huntington Samuel P. 1952. “The Marasmus of ICC: The Commission, the Railroads, and the Public Interest.” Yale Law Journal 61 (April), 467– 509.Google Scholar
Johnston Jason Scott. 2002. “A Game Theoretic Analysis of Alternative Institutions for Regulatory Cost-Benefit Analysis.” University of Pennsylvania Law Review 150 (May): 1343– 1428.Google Scholar
King Gary, James Honaker, Anne Joseph, and Kenneth Scheve. 2001. “Analyzing Incomplete Political Science Data: An Alternative Algorithm for Multiple Imputation.” American Political Science Review 95 (March): 49– 69.Google Scholar
Kolko Gabriel. 1965. Railroads and Regulation: 1877–1916. Princeton, NJ: Princeton University Press.
Laffont Jean-Jacques, and Jean Tirole. 1991. “The Politics of Government Decision-Making: A Theory of Regulatory Capture.” Quarterly Journal of Economics 4 (November): 1089– 1127.Google Scholar
Langbein Laura. 1986. “Money and Access: Some Empirical Evidence.” Journal of Politics 48 (November): 1052– 1062.Google Scholar
Lawsky David. “Report that Microsoft Pushed for Cut in Justice Funding Draws Fire.” Boston Globe, October 17, 1999, sec. F.
Lohmann Suzanne. 1995. Information, Access, and Contributions: A Signaling Model of Lobbying. Public Choice 85 (December): 267– 284.Google Scholar
Mailath George J. 1987. “Incentive Compatibility in Signaling Games with a Continuum of Types.” Econometrica 55 (November): 1349– 1365.Google Scholar
McCubbins Mathew D., and Thomas Schwartz. 1984. “Congressional Oversight Overlooked: Police Patrols versus Fire Alarms.” American Journal of Political Science 28 (February): 165– 179.Google Scholar
Moe Terry M. 1985. “Control and Feedback in Economic Regulation: The Case of the NLRB.” American Political Science Review 79 (December): 1094– 1116.Google Scholar
Moe Terry M. 1987. “An Assessment of the Positive Theory of ‘Congressional Dominance.’” Legislative Studies Quarterly 12 (November), 475– 520.Google Scholar
Morgan Dan, and Juliet Eilperin. “Microsoft Targets Funding for Antitrust Office.” Washington Post, October 15, 1999, sec. A.
Office of the Federal Register, National Archives and Records Administration. 2003. U.S. Government Manual. Washington, DC: U.S. Government Printing Office.
Partlow Joshua. 2003. “Automatic Shutdowns Went Smoothly at Nuclear Plants; Procedure Risky Because it Puts Strain on the Systems.” Washington Post, August 16, 2003, sec. A.
Poole Keith, and Thomas Romer. 1985. “Patterns of Political Action Committee Contributions to the 1980 Campaigns for the U.S. House of Representatives.” Public Choice 47 (1): 63– 112.Google Scholar
Poole Keith T., Thomas Romer and Howard Rosenthal. 1987. “The Revealed Preferences of Political Action Committees.” American Economic Review 77 (May): 298– 302.Google Scholar
Quirk Paul J. 1981. Industry Influence in Federal Regulatory Agencies. Princeton, NJ: Princeton University Press.
Rubin Donald. 1987. Multiple Imputation for Nonresponse in Surveys. New York: Wiley.
Scholz John, and Neil Pinney. 1995. “Duty, Fear, and Tax Compliance: The Heuristic Basis of Citizen Behavior.” American Journal of Political Science 39 (May): 490– 512.Google Scholar
Snyder James M., Jr. 1990. “Campaign Contributions as Investments: The U.S. House of Representatives, 1980–1986.” Journal of Political Economy 98 (December): 1195– 1227.Google Scholar
Stigler George J. 1971. “The Theory of Economic Regulation.” Bell Journal of Economics and Management Sciences 2 (Spring): 3– 21.Google Scholar
Tanner Martin A. 1993. Tools for Statistical Inference: Methods for the Exploration of Posterior Distributions and Likelihood Functions. New York: Springer-Verlag.
Ting Michael. 2001. “The Power of the Purse and its Implications for Bureaucratic Policy-Making.” Public Choice 106 (March): 243– 274.Google Scholar
U.S. Nuclear Regulatory Commission. 2000. “General Statement of Policy and Procedure for NRC Enforcement Actions.” Rockville, MD: NRC.
Whitford Andrew B. 2002. “Decentralization and Political Control of the Bureaucracy.” Journal of Theoretical Politics 14 (April): 167– 193.Google Scholar
Wilson James Q. 1989. Bureaucracy: What Government Agencies Do and Why They Do It. New York: Basic Books.
Wood B. Dan, and Richard W. Waterman. 1994. Bureaucratic Dynamics: The Role of Bureaucracy in a Democracy. Boulder, CO: Westview Press.
Wright John R. 1989. “PAC Contributions, Lobbying, and Representation.” Journal of Politics 51 (August): 713– 729.Google Scholar
Wright John R. 1990. “Contributions, Lobbying, and Committee Voting in the U.S. House of Representatives.” American Political Science Review 84 (June): 417– 438.Google Scholar