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

30 Pages Posted: 26 Jul 2007

See all articles by Rui J.P. de Figueiredo

Rui J.P. de Figueiredo

University of California, Berkeley - Business & Public Policy Group

Geoff A. Edwards

Charles River Associates (CRA)

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.

Suggested Citation

de Figueiredo, Rui José P. and Edwards, Geoff A., Does Private Money Buy Public Policy? Campaign Contributions and Regulatory Outcomes in Telecommunications. Journal of Economics & Management Strategy, Vol. 16, No. 3, pp. 547-576, Fall 2007, Available at SSRN: https://ssrn.com/abstract=1003290 or http://dx.doi.org/10.1111/j.1530-9134.2007.00150.x

Rui José P. De Figueiredo (Contact Author)

University of California, Berkeley - Business & Public Policy Group ( email )

545 Student Services Building
Berkeley, CA 94720
United States
510-642-6452 (Phone)
510-643-1412 (Fax)

Geoff A. Edwards

Charles River Associates (CRA) ( email )

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