Doctoral Dissertation Research in Economics: The Price of Power: The Returns to Lobbying in the Energy Sector

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Interest groups attempt to influence policy-making of elected representatives through various means: making financial contribution to political candidates, encouraging citizens to vote for a specific candidate and/or to directly contact their legislators regarding a specific legislative issue, and hiring or retaining professional lobbyists, to name a few. In terms of interest groups? expenditures, hiring or retaining professional lobbyists is the single most prominent political activity. The central question is how effective these lobbying expenditures are, especially in two aspects: first, to what extent lobbying expenditures affect the probability that a policy is enacted; and second, how big the private returns to lobbying expenditures are. The proposed research will address these issues regarding energy legislation in the 110th Congress. This project constructs a novel dataset on lobbying expenditures and targeted federal policies by energy firms, trade associations, and environmental groups. The main sources of the dataset include lobbying reports mandated by Lobbying Disclosure Act (1995) and bill information available in the Library of Congress. The policies in the dataset are to create, extend, or repeal a certain federal financial intervention or regulation that directly affects firms and municipalities that are involved in energy-related business. One of the most innovative features of the dataset is that a lobbying target is a policy, which may appear in multiple bills that may also contain other policies, and the final status of a policy is defined accordingly. The Pis use a game-theoretic model where multiple interest groups with different benefits or costs from a policy non-cooperatively contribute money to exert lobbying efforts in order to affect the chance of its approval. This project will contribute to our understanding of the role of lobbying in representative democracy. First, the PIs focus on the policies that are public goods in the sense that they directly affect all relevant parties, unlike policies with specific beneficiaries. This project is the first attempt to measure the effect of lobbying while explicitly modeling the strategic interaction among various interest groups whose positions on a specific legislative issue can be opposite to each other. Second, energy is one of the main issues for which the conventional wisdom is that industry interests have prevailed over the interests of the general public in shaping legislation. Broader Impact: In a debate on lobbying and its regulation, the magnitude of the effect of lobbying expenditures on policy-making is of primary interest. However, a study with a representative sample of energy issues has yet to be done. The results of this project will help fill in this gap and influence the debate on the regulation of lobbying in the United States.