Policy Influence and Private Returns from Lobbying in the Energy Sector

Abstract

Firms lobby the U.S. Congress to influence policy-making. This paper quantifies the extent to which lobbying expenditures affect policy enactment. First, I construct a novel dataset comprised of federal energy legislation and lobbying activities by the energy sector during the 110th Congress. Second, I develop and estimate a game- theoretic model where heterogeneous players choose lobbying expenditures to affect the probability that a policy is enacted. I find that the effect of lobbying expenditures on a policy's equilibrium enactment probability is very small. However, the average returns from lobbying expenditures are estimated to be over 140%.

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