Review of Industrial Organization 17: 411–426, 2000.
© 2000 Kluwer Academic Publishers. Printed in the Netherlands.
Corporate Political Activities and Oligopoly
Department of Agricultural, Food and Resource Economics, Rutgers University, New Brunswick, NJ
Abstract. Businesses participate in political activities, such as campaign contributions and lobbying,
to inﬂuence public policy formulation and implementation. Using a sample of U.S. food manufac-
turing industries, this study measures the welfare impact of corporate political activities in those
industries. Empirical analysis shows that rent seeking was imperfect and corporate political activities
were higher in those industries that were highly concentrated, large in employee size and sales, and
deeper in debt.
Key words: Food industries, lobbying, oligopoly, rent seeking, welfare loss.
A considerable amount of literature has been developed since the pioneering work
of Tullock (1967), Krueger (1974), and Posner (1975) on corporate political activ-
ities aimed at inﬂuencing public policy formulation and implementation. Broadly
deﬁned as “rent seeking”, such activities lead to welfare loss. In the United States,
the degree to which “special interests” inﬂuence the formulation and implementa-
tion of various regulations at the Federal and state levels is a much debated issue.
Corporate political participation is so deeply rooted in the United States electoral
and legislative processes that attempts to carry out campaign ﬁnance reform have
died even before arriving at the U.S. House or Senate ﬂoors.
tions in the United States participate in the election process through their Political
Action Committees (PAC; e.g., Coca-Cola Co. Nonpartisan Committee for Good
Government). In addition to PACs, some businesses have a large number of lob-
The author gratefully acknowledges valuable comments by Professors Bruce Gardner and
Rigoberto Lopez, Dr. Susan Bhuyan, Editor of this journal, and two anonymous referees. The usual
disclaimers apply. This article contributes to NJAES projects No. 02141 and 02263.
See Makinson (1990) and Zuckerman (1992) for a detailed list of money spent on political
activities by businesses in the U.S. The Center for Responsive Politics, a Washington, D.C.-based
public “watch-dog” group regularly publishes reports on corporate political activities in the U.S.