Do Powerful Politicians Cause Corporate Downsizing? / Lauren Cohen, Joshua D. Coval, Christopher Malloy.

Format:

Book

Author/Creator:

Cohen, Lauren.

Contributor:

National Bureau of Economic Research.

Coval, Joshua D.

Malloy, Christopher.

Series:

Working Paper Series (National Bureau of Economic Research) no. w15839.

NBER working paper series no. w15839

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

This paper employs a new empirical approach for identifying the impact of government spending on the private sector. Our key innovation is to use changes in congressional committee chairmanship as a source of exogenous variation in state-level federal expenditures. In doing so, we show that fiscal spending shocks appear to significantly dampen corporate sector investment and employment activity. These corporate reactions follow both Senate and House committee chair changes, are present among large and small firms and within large and small states, are partially reversed when the congressman resigns, and are most pronounced among geographically-concentrated firms. The effects are economically meaningful and the mechanism - entirely distinct from the more traditional interest rate and tax channels - suggests new considerations in assessing the impact of government spending on private sector economic activity.

Notes:

Print version record

March 2010.