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CANCELLED-Joint Industrial Organization & Public Economics Workshop: In Song Kim

Wednesday, December 4, 2019 at 11:40am to 1:10pm

Uris Hall, 498
Central Campus

In Song Kim - MIT

The Effects of Firms' Lobbying on Resource Misallocation (joint w/Federico Huneeus)

Abstract:   We study the causal effect of firms’ lobbying activities on the misallocation of resources through the distortion of firm size. To address the endogeneity between firms’ lobbying expenditure and their size, we propose a new instrument. Specifically, we measure firms’ political connections based on the geographic proximity between their headquarter locations and politicians’ districts in the U.S., and trace the value of these networks over time by exploiting politicians’ assignment to congressional committees. We find that a 10 percent increase in lobbying expenditure leads to a 3 percent gain in revenue. To investigate the macroeconomic consequences of these effects, we develop a heterogeneous firm-level model with endogenous lobbying. Using a novel dataset that we construct, we document new stylized facts about lobbying behavior and use them, including the one from the instrument, to estimate the model. Our counterfactual analysis shows that the return to firms’ lobbying activities amounts to a 22 percent decrease in aggregate productivity in the U.S.
 

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Event Type

Class/ Workshop

Departments

Economics

Tags

economics, EconSeminar, EconIO, EconPublic

Hashtag

#CornellEcon

Contact E-Mail

uab1@cornell.edu

Contact Name

Ulrike Kroeller

Contact Phone

60

Speaker

In Song Kim

Speaker Affiliation

MIT

Open To

Cornell Economics Community (List Serve Members)