Corporate Lobbying and US Federal Grants

This paper examines the effect of firms' lobbying activities on US federal grants. For an average firm in terms of grant amount and lobbying expenditures, my model indicates that one additional dollar in lobbying to the granting agency yields to a minimum increase in the federal grant of 3.54 dollars. In addition, firms lobbying the granting agency during the grant allocation process are 15.2% more likely to receive at least one federal grant, which translates into odds to get an award 25.5 times bigger for lobbying firms. These results are robust across measures of lobbying, and accounts for endogeneity concerns by employing instrumental variable strategies. I also observe that federal grants are more responsive to lobbying expenditures at the granting agency level when (1) the head of granting agencies is appointed by a conservative president, (2) firms show less unethical behaviors and (3) federal grant amounts are less transparent. Overall, the results appear consistent with the regulatory capture theory