On Business Lobbying and Climate Politics

Abstract

This dissertation studies three aspects of business political influence. In the first chapter I study how business opposition to climate policy influences its design. Countries have employed a wide range of policy instruments to mitigate climate change. These policies share a common pattern: governments initially rely on subsidies, together with command-and-control regulations, and eventually adopt carbon pricing. I develop a dynamic model of climate policymaking that accounts for this pattern. Although the first-best policy is solely a carbon tax, a climate-concerned policymaker uses subsidies to induce investments in emissions-abatement technologies with the goal of building a coalition in support of efficient policies in the future. The model provides additional insights: First, a policy package that satisfies political constraints and passes a cost-benefit analysis only exists if the economic costs of decarbonization are not too large, and the social cost of carbon is intermediate. Second, soft commitments, such as net-zero targets, can have real consequences by shifting expectations, but only if initial political pressure is not too large and policymakers are sufficiently concerned about climate. Finally, a higher risk of electoral turnover that replaces a green proposer with a misaligned proposer can improve the prospects for a green transition. In the second chapter I study lobbying coalitions. Policy advocates such as interest groups and bureaucrats often form tactical coalitions in order to advance their policy goals on specific issues, even if their interests differ. When do advocates form coalitions instead of lobbying separately? What is the impact of coalitions on welfare and policy moderation? To answer these questions I develop a model of informational lobbying between two advocates and a policymaker. The advocates develop policy proposals, either independently or jointly, and gather verifiable information about their quality. A coalition requires compromise, but reduces competition and can lead to a more effective use of information. I find that, when their interest divergence is moderate and the policymaker's alternative policy is weak, advocates use coalitions in order to filter the information they produce; when the policymaker's alternative policy is strong, in contrast, they use coalitions to aggregate their information. The welfare consequences of coalitional lobbying are thus ambiguous. Interest diversity has a non-monotonic effect on the level of policy compromise, and a high level of compromise can signal low quality policies. In the last chapter, joint work with Pablo Balán and Ignacio Puente, we study how organizational structures---specifically family firms---influence the effectiveness of campaign finance regulation. Through an empirical analysis of Brazil's ban on corporate campaign contributions, we demonstrate that family firms adapt to such regulation more effectively than professionally-managed companies. Following the ban, members of controlling families substitute their personal contributions for previous corporate donations, with an elasticity more than four times higher than in non-family firms. We identify peer effects within families that facilitate this adaptation, showing how kinship networks solve collective action problems in political influence that emerge under regulatory constraints.Governmen