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Here is an interesting new paper which demonstrates that lobbying at both the extensive and intensive margins is almost exclusively determined by firm size.

…  Our data exhibit three striking facts: (i) few firms lobby, (ii) lobbying status is strongly associated with firm size, and (iii) lobbying status is highly persistent over time. … we find significant evidence that up-front costs associated with entering the political process help explain all three facts. … For a firm already lobbying, the response is determined by the importance of the issue to the firm’s business rather than the scale of the firm’s prior lobbying efforts. These results support the existence of significant barriers to entry in the lobbying process.

I am not buying this at the local level. Small supermarkets, auto-dealers, developers and the realtors have hijacked the local political process in many places. Bonus question to readers: suppose capping firm size is done, how would the desire for political pressure reveal itself?

4 Responses to “A Reason to Support Firm Size Caps?”

  1. Chris says:

    “few firms lobby”

    Does this take into account belonging to trade associations? Small firms my not directly lobby, but they many pay dues to some organization that lobbies on their behalf.

  2. RIT-Rich says:

    How would you “cap” a firm’s size?

  3. Harry says:

    The problem is not lobbying. One big problem has been created by the judiciary giving the federal government the power to regulate anything it wishes through the Commerce Clause, which was originally intended to prevent the States from making economic war among themselves.

    About a mile away from me the National Radiator Association has its headquarters, and one time I had breakfast (Chamber of Commerce meeting) with the person who ran the office. They did not have a full-time lobbyist in DC, but they did pay a DC firm to represent them, and I assume they followed state and local regulation as well, as in what happened if the Nevada legislature got steamed over all the cars getting overheated in Death Valley.

    Now, if we could pass a law that all the politicians had to spend 250 weekdays fishing, doing pilates, team sports, or other idle pursuits, that would not solve the problem, but it might help.

  4. chuck martel says:

    “Entering the political process” could be as insignificant as simply voting or even engaging in political discussion with the guy on the next bar stool. Lobbying could be shooting off an email to your representative or writing a letter to him. Firms that provide a lobbying service ultimately bill for their time, which could be not very much or a real lot. And, as previously mentioned, not only firms but associations of firms and individuals lobby, as well as units of government. Pretty amorphous concept.

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