Essays on Political Institutions and Economic Rents

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This dissertation consists of two essays studying the relationships between political institutions and economic rents and policies. In Chapter 1, I use an event study approach to investigate the empirical relationships between court-ordered campaign finance (de-)regulation and the stock value of campaign contributors in the United States. The Bipartisan Campaign Reform Act of 2002 addressed two issues, soft money and independent expenditures on issue ads for electoral advocacy. The Supreme Court initially upheld most provisions in 2003 but subsequently weakened and struck down provisions on independent expenditures. I examine the stock value of firms with a long history of campaign contributions around the key developments of three Supreme Court cases. Stock prices of contributing firms react positively to Court events associated with campaign finance deregulation. It implies that the average rates of return to these rights of political spending are between 1% and 2% of stock values.

In Chapter 2, I study the causal effects of political representation in the national government on local public expenditure, using a natural experiment arises in Japan's electoral system. In Japan's mixed-member electoral system, a candidate who fails to obtain a pluarity of votes in a district may still be elected through a party list, effectively giving her district two representatives instead of one. By extending the conventional regression discontinuity design, I construct a sample of districts in which the assignment of an additional representative is as if random. I find that having an additional representative on average increases municipal expenditure by 1.8%. Within marginally winning districts, core municipalities of the second representative gain, but so do core municipalities of the first representative. This suggests that even in parliamentary systems with strong parties, political competition incentivizes politicians to bring public spending to core supporters in their districts.