Regulating Lobbyists? Maybe Not...

You Owe Me

Ulrike Malmendier, Klaus Schmidt

NBER Working Paper No. 18543
Issued in November 2012
NBER Program(s):   HC   HE   LS

In many cultures and industries gifts are given in order to influence the recipient, often at the expense of a third party. Examples include business gifts of firms and lobbyists. In a series of experiments, we show that, even without incentive or informational effects, small gifts strongly influence the recipient’s behavior in favor of the gift giver, in particular when a third party bears the cost. Subjects are well aware that the gift is given to influence their behavior but reciprocate nevertheless. Withholding the gift triggers a strong negative response. These findings are inconsistent with the most prominent models of social preferences. We propose an extension of existing theories to capture the observed behavior by endogenizing the “reference group” to whom social preferences are applied. We also show that disclosure and size limits are not effective in reducing the effect of gifts, consistent with our model. Financial incentives ameliorate the effect of the gift but backfire when available but not provided. 

They are who we thought they were

In a fascinating new NBER working paper (ungated version here), Bertrand, Bombardini, & Trebbi try to sort out whether it's expertise or connections that make lobbyists valuable. Here's the bottom line (the extra emphasis is mine, not theirs):

"A pure issue expertise view of lobbying does not fit the data well. Instead, maintaining connections to politicians appears central to what lobbyists do. In particular, we find that whom lobbyists are connected to (through political campaign donations) directly affects what they work on. More importantly, lobbyists appear to systematically switch issues as the politicians they were previously connected to switch committee assignments, hence following people they know rather than sticking to issues. We also find evidence that lobbyists that have issue expertise earn a premium, but we uncover that such a premium for lobbyists that have connections to many politicians and Members of Congress is considerably larger."

Somehow, those results reminded me of this: