Academic Earmarks and the Returns to Lobbying

In this paper, we statistically estimate the returns to lobbying by universities. We develop a simple theoretical model of university lobbying for academic earmarks to motivate our empirical work. We first show that universities that are represented by a House Appropriations Committee (HAC) or Senate Appropriations Committee (SAC) member spend more on lobbying. Next, in a later instrumental variables estimation, we find that a 10% increase in lobbying expenditures by a university without HAC or SAC representation results in a 1.5% increase in earmark funding, although this relationship is not statistically significant in many specifications. For a university with HAC or SAC representation, a 10% increase in lobbying yields an additional 2.8% or 3.5% increase in earmarks, respectively. Moreover, we cannot reject that universities are setting marginal benefit of lobbying equal to its marginal cost of lobbying on average, although those with SAC representation do appear to underinvest in lobbying. We show that these results are consistent with predictions of the Grossman-Helpman (2001) and Helpman-Persson (2001) models of lobbying. JEL Classification: K0, H1 We would like to thank Steve Ansolabehere, Frank Baumgartner, Ernie Berndt, Peter Davis, Ig Horstmann, Paul Joskow, Gary King, Abigail Payne, Amil Petrin, Jim Rebitzer, Roberto Rigobon, Jim Savage, Jim Snyder, Jesper Sorensen, Scott Stern, and participants in seminars at Harvard, MIT, Berkeley, Carnegie Mellon, Chicago, George Mason, Northwestern, Toronto, Washington University, USC, Caltech, Cornell and the NBER for very helpful discussion and comments.