Li, Zhao. 2018. "How Internal Constraints Shape Interest Group Activities: Evidence from Access-Seeking PACs." American Political Science Review 112(4):792--808.
Abstract. Interest groups contribute much less to campaigns than legally allowed. Consequently, prevailing theories infer these contributions must yield minimal returns. I argue constraints on PAC fundraising may also explain why interest groups give little. I illuminate one such constraint: access-seeking PACs rely on voluntary donations from affiliated individuals (e.g., employees), and these PACs alienate donors with partisan preferences when giving to the opposite party. First, difference-in-differences analysis of real giving shows donors withhold donations to access-seeking PACs when PACs contribute to out-partisan politicians. Next, an original survey of corporate PAC donors demonstrates they know how their PACs allocate contributions across parties, and replicates the observational study in an experiment. Donors' partisanship thus limits access-seeking PACs' fundraising and influence. This provides a new perspective on why there is little interest group money in elections, and has broad implications for how partisan preferences and other internal constraints shape interest group strategy.
Li, Zhao. 2019. "Looking Inside the Black Box of Firms: A Proposal for A Research Agenda." The Political Economist 15(2): 17-19.
The Subprime Mortgage Crisis and the Tea Party Movement: Evidence from Nationwide Campaign Finance and Real Estate Transactions (available upon request)
Abstract. Voters tend to reward extremist politicians following economic shocks, with potentially adverse policy implications. However, whether campaign donors in the U.S. respond similarly to economic crises remains an open question. Linking nationwide campaign finance and real estate transactions, I examine how exposure to the subprime mortgage crisis affected Republican donors’ support for Tea Party candidates, an extremist faction of the Republican party that opposed government relief for underwater homeowners. Difference-in-differences analysis shows that Republican donors in neighborhoods hit harder by foreclosures contributed less to Tea Partiers, but not to other GOP candidates. Republican donors' personal risks of mortgage default cannot rationalize this effect. Instead, Republican donors in distressed neighborhoods appeared to have punished Tea Partiers more when donors' neighborhoods are racially homogeneous. Campaign donors, whose lived experiences during economic shocks contrast with those of the general electorate, may provide distinct electoral and policymaking incentives in times of economic crises.
(with Adam Bonica) Inferring Candidates’ Issue-Specific Positions from Itemized Campaign Contributions Using Supervised Machine Learning (available upon request)
Abstract. The Supreme Court upholds mandatory disclosure of itemized contributions as an important means to help voters place candidates on the political spectrum “more precisely than is often possible solely on the basis of party labels and campaign speeches” (Buckley v. Valeo). To assess the informational value of disclosure, we apply supervised machine learning to infer candidates’ issue positions (using interest group ratings and alternative measures) based on the itemized contributions they receive. Our models outperform DW-NOMINATE scores in predicting candidates’ positions across policy domains, especially when distinguishing candidates from the same party. Additionally, we identify specific donors that best signal where candidates stand on each issue. Furthermore, fundraising records of legislators prior to winning office can forecast their future issue-specific positions. In short, itemized contributions can help voters accurately place candidates on different issues of interest, and are uniquely valuable for comparing co-partisan candidates in the absence of legislative records.
(with Richard DiSalvo) Economic Geography and Special Interest Entrenchment: Evidence from the Shale Boom and State Campaign Finance (available upon request)
Abstract. Firms often attempt to exert political influence where they operate, e.g. by making campaign contributions to local politicians. But does business entry cause an influx of special interest activities? And if so, how might these activities entrench special interests and alter the incentives of policymakers? We study how the shale boom, which transformed the geographic distribution of drilling activities across the US, shifted campaign contributions from oil and gas firms. Using an instrumental variable design, we show that state legislative districts where drilling expanded due to shale saw significant and sizable increases in oil and gas contributions. Often, these additional contributions targeted Republican candidates in Democratic-leaning districts, so may reflect an attempt by the industry to elect allies. Our findings help provide a rationale for politicians strategically supporting business activities depending on the political allegiances of interest groups, illuminating one impetus for political distortions of economic development.