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Buying the Vote? The Economics of Electoral Politics and Small-Business Loans

Published online by Cambridge University Press:  05 August 2021

Ran Duchin Open the ORCID record for Ran Duchin [Opens in a new window]  and
John Hackney
Ran Duchin*
Affiliation:
Boston College Carroll School of Management
John Hackney
Affiliation:
University of South Carolina Moore School of Businessjohn.hackney@moore.sc.edu
*
duchinr@bc.edu (corresponding author)
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Abstract

We study the relation between electoral politics and government small-business lending, employment, and business formation. We construct novel measures of electoral importance capturing swing and base voters using data from Facebook ad spending, independent political expenditures, the Cook Political Report, and campaign contributions. We find that businesses in electorally important states, districts, and sectors receive more loans following the onset of the COVID-19 crisis, controlling for funding demand and both health and economic conditions. Estimates from survey and observational data show that electoral politics and the allocation of government funds affect employment, small-business activity, and business applications.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 7: JFQA Symposium on the Consequences of the COVID-19 Pandemic for Firms and Capital Markets , November 2021 , pp. 2439 - 2473
Copyright
© The Author(s), 2021. Published by Cambridge University Press on behalf of the Michael G. Foster School of Business, University of Washington

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Footnotes

For helpful comments, we thank Mara Faccio, Jarrad Harford, and conference participants at the 2020 International Conference of the Taiwan Finance Association.

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