Bureaucratic Revolving Doors and Interest Group Participation in Policymaking

• In Event: Politics of Rulemaking in the Administration State

Abstract

There is growing concern about the movement of individuals from private sectors to bureaucracies in the United States. To fully understand the effect of the bureaucratic revolving door on policy outcomes, it is crucial to understand how the bureaucratic revolving door affects interest groups’ incentives to participate in policymaking and provide information to bureaucrats. One scenario is the substitution effect: groups are less likely to engage in the agency’s policymaking process if individuals connected to them become bureaucrats of that agency. Another scenario is the complement effect: groups participate more in the agency’s policymaking process in response to their connected individuals’ move into the government agency. Ex ante, it is not clear which effect would prevail. Whether the substitution or complement effect arises depends on what information interest groups deliver to bureaucrats and in what policymaking environment they engage.

Identifying which effect is present and why is crucial for understanding the implications of the bureaucratic revolving-door phenomenon on interest group influence. If groups strategically adjust their political participation in expectation that their connected bureaucrats will enact preferable policy outcomes, the degree of interest group influence would not be fully captured by a measure of explicit interest group activities, such as lobbying spending and participation on advisory committees. Nonetheless, there have been no studies that directly address this question to date.

In this paper, we provide a theoretical framework and empirical tests that examine how the entry of bureaucrats with connections to interest groups affects connected groups’ participation in bureaucratic policymaking. We argue that the substitution effect will prevail under a bureaucratic policymaking environment where groups provide their technical and legal knowledge to bureaucrats. We test our theoretical intuition by constructing a novel dataset on career trajectories of bureaucrats in the Office of the US Trade Representative (USTR) and firms that are connected to USTR’s revolving-door bureaucrats during the period 1997-2017. Empirical results support the substitution effect: firms with connections to USTR bureaucrats decrease their lobbying spending and participation on advisory committees under the USTR. Consistent with our theoretical argument, the substitution effect is stronger if connected bureaucrats are more influential in policy production. That is, the substitution effect is stronger for connected bureaucrats with JD degree, position in industry and law-related USTR subagencies, higher USTR salary, and closer political preference alignment with the median USTR ideology. Our findings suggest that a decrease in interest groups’ political activities might not imply that their influence on policymaking is diminished.

Authors

• Kyuwon Lee, New York University

• Hye Young You, New York University