Firm Heterogeneity and Lobby Participation

Matilde Bombardini’s “Firm Heterogeneity and Lobby Participation” is forthcoming in the JIE.

This paper builds a model where individual firms determine the amount of resources to allocate to political contributions and shows that, in the presence of a fixed cost of channeling political contributions, it is efficient for a lobby to be formed by the largest firms in a sector. Therefore the size distribution of firms plays an important role: sectors with a higher share of firms above a given size exhibit higher intensity of political activity. This prediction is borne out by the data: industries characterized by higher firm size dispersion obtain a higher level of protection.