The Effect of Interest Group Pressure on Favorable Regulatory Decisions : The Case of Certificate-of-Need Laws

Certificate-of-need (CON) laws currently prohibit entry or expansion of healthcare facilities in 35 states and the District of Columbia. In a lengthy process, medical providers must prove to regulators that their new services and equipment are needed. Medical providers who succeed are effectively guaranteed market power, and thus are able to acquire economic rents. These economic rents create an incentive for medical providers to engage in rent-seeking. Using recent data from Georgia, Michigan, and Virginia, we examine whether political campaign contributions made by medical providers affect the likelihood of their CON proposals being approved. Our results are among the first to consider the effect of campaign contributions on industry regulation