Tyler Cowen quotes an interesting finding:
The average state experiences a 40 to 50 percent increase in earmark spending if its senator becomes chair of one of the top-three committees. In the House, the average is around 20 percent. For broader measures of spending, such as discretionary state-level federal transfers, the increase from being represented by a powerful senator is around 10 percent.
That part is uninteresting. Good to quantify, but not surprising in the least.
This part, however, is very puzzling:
... We began by examining how the average firm in a chairman's state was impacted by his ascension. The idea was that this would provide a lower bound on the benefits from being politically connected. It was an enormous surprise, at least to us, to learn that the average firm in the chairman's state did not benefit at all from the increase in spending. Indeed, the firms significantly cut physical and R&D spending, reduce employment, and experience lower sales.
I don't understand this at all. I've been trying to think of an example that helps me explain this mentally, and I just can't. I don't know what he did to come up with these numbers, so perhaps it's just spurious. Or perhaps it's just the reverse? That is, losing jobs causes more funding to come your way. You could believe that, except for the fact that they specifically looked at earmarks after a local congressperson ascended to the chair of a committee, and it would seem odd for that to be correlated with job losses in your home state.
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