Market Structure and Conflict of Interests: Inter-Governmental Lobbying

• In Event: Political Economy of Lobbying

Abstract

Local governments in the U.S. hire lobbyists when applying for funding from the federal government; yet we have little understanding of how the structure of the lobbying industry affects lobbying behavior and outcomes. We document that the U.S. lobbying industry is concentrated and large lobbying firms often represent multiple local governments
competing in the same issue area. Do large lobbying firms distort funding allocations between their clients to maximize their own profits? Are lobbying firms extracting most rents from publicly allocated funds and foreclosing access to public funds from smaller local governments? We answer these questions using a comprehensive dataset of all lobbying activities of U.S. cities and an official dataset of all fiscal transfers (contracts, grants, direct payments
and loans) between federal-level agencies and local governments between 2008 and 2018. Preliminary results suggest that lobbying firms with multiple clients favor larger clients and disproportionately distorts funding towards larger cities. Moreover, in issue areas where firm concentration is high, cities on average pay more to lobbying firms for the same services.

Authors

• Yue Hou, University of Pennsylvania

• Peichun Wang, Microsoft Research