Jordi Blanes i Vidal, Mirko Draca and Christian Fons-Rosen estimate the value of political connections in Washington

Christian Fons-Rosen

Jordi Blanes i Vidal

Mirko Draca

English

Research Papers in Economics

CentrePiece Autumn 2010
Lobbyists – professional paid advocates who aim to
influence the decisions of legislators or government
officials – play an increasingly important role in the
political system of the United States and other
democracies. In 2008, for example, $3.97 billion was
spent on lobbying US federal officials – more than twice
the amount spent ten years earlier. And recent debates on
healthcare and financial reform have been marked by
sharp criticisms of the role of staffers-turned-lobbyists in
watering down the bills. 
The movement of political staffers from roles in the
government to lucrative jobs in the lobbying industry is
often described as a ‘revolving door’. The flow of money
and staffers towards Washington’s lobbying firms has led
to concerns that corporations and other organisations are
able to buy influence and acquire privileged access to
important politicians. Furthermore, ex-staffers gain private
benefits in such transactions, and this may have a
negative impact on policy outcomes.
The most common criticism of former staffers is that they
are simply trading on their political connections. But
lobbyists who used to work in government dispute the
notion that their new roles allow them to ‘cash in’ on
their connections. They claim that their earnings reflect
expertise on policy issues and the inner workings of
government in general. In other words, they argue, it is
‘what you know’ not ‘who you know’ that matters. 
Empirically, the issue of separating the ‘what you know’
from the ‘who you know’ is a challenge for researchers. 
A plausible argument can be made that former staffers
would be high earners in many different contexts where
political connections do not matter. The specific problem
here is separating the effects of ability on earnings from
those of acquired political connections. Generally, earnings
or revenue data only allow us to observe the effects of
both factors together. 
Our research addresses this challenge by looking at the
impact of a serving politician’s exit on the lobbying
revenues of his or her former staffers. The point at 
which a politician leaves office provides a window for
examining the specific role of political connections. 
If a politician is no longer serving in Congress, then 
‘Revolving door’ lobbyists
To what extent can former government officials ‘cash in’ on the personal
connections acquired during their periods of public service? Research by
Jordi Blanes i Vidal, Mirko Draca and Christian Fons-Rosen provides
the first quantitative evidence of how former congressional staffers benefit
from Washington’s ‘revolving door’.
When a US senator or
representative leaves office,
the earnings of a lobbyist that
used to work for them falls on
average by one fifth
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in brief...CentrePiece Autumn 2010
the political connection held by their former staffers is in
effect obsolete.
This is because the politician in question no longer has
direct influence over legislative outcomes or the content
of congressional debates. In turn, this means that in cases
where gaining access is a goal of special interest groups,
lobbying spending will move away from lobbyists 
affiliated with exiting politicians and towards those with
still current connections. 
Our estimates based on this ‘identification strategy’
indicate that the value of political connections to lobbyists
is high. Lobbyists suffer a revenue loss of over 20% when
their former political employer leaves Congress. In dollar
terms, this translates into $177,000 per year for the
typical lobbyist’s practice. Furthermore, this effect is
persistent for at least three years – it seems that it is
difficult for lobbyists to offset the impact of a lost political
connection.
The size of the revenue effects also increases with the
strategic importance of a politician. Senators are more
valuable than representatives and, even within the two
chambers of Congress, more senior politicians – defined in
terms of either tenure or committee status – are more
valuable than their junior counterparts.
Our study points the way to a potential new wave of
research using data released under public disclosure laws.
The basic data we use were made available as part of the
Lobbying Disclosure Act of 1995. Since then, non-partisan
organisations like the Center for Responsive Politics and
LegiStorm have done important work improving access
and promoting usage of the data.
Researchers now have the possibility of combining
datasets across a number of sources to search for
statistical patterns such as those we find for politically
connected lobbyists. As a result, this takes public scrutiny
to a new level. We can try to find important information
and behaviours ‘hidden’ in the data. Hence, one major
consequence of laws such as the 1995 Act is that they
make independent research and evaluation of political
questions possible.
Though our focus is on Washington, this study is relevant
for policy-makers and regulators in Britain. In particular it
must be noted that our research would not be possible
here. The government simply does not demand the
registration and reporting of lobbying activity in the same
way as in the United States. 
This has allowed lobbying in Britain to take place in the
form of a shadow economy, as demonstrated by the case
of former Labour cabinet minister Stephen Byers, who was
secretly recorded offering himself to potential employers
outside government as ‘a sort of cab for hire’ for up to
£5,000 a day.
Recently, there have been signs of change in Britain. The
coalition government has pledged to reform current
practices. But this ambition should be treated with some
scepticism. There are a lot of vested interests intent on
keeping lobbying activity unreported, and so the ‘new
politics’ could well end up being a lot like the old politics.
The standard claim 
of lobbyists – that it is ‘what
you know’ not ‘who you know’
that matters – does not stand
up to formal scrutiny
This article summarises ‘Revolving Door
Lobbyists’ by Jordi Blanes i Vidal, Mirko Draca
and Christian Fons-Rosen, CEP Discussion Paper
No. 993 (http://cep.lse.ac.uk/pubs/
download/dp0993.pdf).A video interview
discussing the study is available here:
http://www2.lse.ac.uk/newsAndMedia/videoAnd
Audio/research/washingtonsRevolvingDoor.aspx
Jordi Blanes i Vidal is a lecturer in LSE’s
management department and a CEP research
associate. Mirko Draca is a CEP research
economist. Christian Fons-Rosen is an assistant
professor at Universitat Pompeu Fabra.All are
part of CEP’s research programme on
productivity and innovation.
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In brief: 'Revolving door' lobbyists

http://cep.lse.ac.uk/pubs/download/cp322.pdf

In brief: 'Revolving door' lobbyists

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