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The Relationship Between Political Connections and the Financial Performance of Industries and Firms
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The Relationship Between Political Connections and the Financial Performance of Industries and Firms

Russell S. Sobel and Rachel L. Graefe-Anderson
Mercatus Center, 2014
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Editorial Rating

7

Qualities

  • Innovative
  • Eye Opening

Recommendation

Crony capitalism might be worse than you think. This eye-opening study from the conservative Mercatus Center says corporations that drop big bucks on lobbyists are no more profitable than firms that spend less to build political clout. But economic researchers Russell S. Sobel and Rachel L. Graefe-Anderson conclude that top executives of politically influential companies earn more than their peers at firms that lobby less actively. Alas, disappointment looms for readers hoping that the authors will name names; they don’t proffer a list of which executives at which crony companies make the most. Nevertheless, getAbstract recommends this report for its findings on who really benefits from government subsidies.

Take-Aways

  • Corporate spending on political lobbying in the United States has risen by 25% since 2007 to a total of $3.5 billion in 2010.
  • After the crisis, bailouts and stimulus injected huge sums of money into the economy, spurring companies to boost their lobbying efforts.
  • Research shows that firms that spend heavily on lobbying are no more successful or valuable than companies that spend less.

About the Authors

Russell S. Sobel is an economist and a visiting scholar at The Citadel, South Carolina. Rachel L. Graefe-Anderson is an assistant professor of business at the University of Mary Washington, Virginia.

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