IFin Seminar, Tania Babina, Columbus Business School "The Impact of Money in Politics on Labor and Capital: Evidence from Citizens United v. FEC"

Institute of Finance

Date: 5 October 2022 / 12:25 - 13:40

Speaker: Tania Babina, Columbus Business School

Title:     "The Impact of Money in Politics on Labor and Capital: Evidence from Citizens United v. FEC"

Date:     October 5, 2022

Time:     12:25

Room:     A-24 (red building)

Lugano  West Campus

 

Abstract:

The sharp increase of corporate money in politics has raised concerns that it leads to policies that benefit capital and harm labor. We examine this claim using the surprise Supreme Court ruling Citizens United v. FEC (2010), which rendered bans on political spending unconstitutional, affecting roughly half of US states (treated states). In a difference-in-difference analysis, we find that treated states have experienced increases in both capital and labor income. These effects are consistent with money in politics increasing political competition and leading to policies that represent the interests of a broader set of constituents. In support of this mechanism, we find that, first, political contributions rise among a broad set of constituents rather than concentrate in historically politically active groups. In response, we find increased political turnover among governors and state legislators. Second, state legislatures become less polarized, suggesting that newly-elected politicians vote in favor of policies relevant for a broader set of constituents. Third, labor outcomes improve more in ex-ante politically inactive firms. Finally, affected states see lighter regulatory burdens. On net, the economic environment becomes more growth-friendly, and some of these gains are passed on to workers.

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