Lobbying as Source of Rent Seeking: Clarification of the Relationship Between Corporate Lobbying and Firm Tax Benefits

Paper Link My first original, published and well-received economic research paper in 2018 utilizing public choice theory, econometrics, and computational analysis to determine the nature and size of firm unrecognized tax benefits and marginal effective tax rate changes resulting from changes in individual corporate lobbying expenditures at the federal level. Based on panel data of firm fundamentals and other control variables, methods employed included analysis of incentive structures, multiple linear regressions, marginal analysis, and systems generalized method of moments analysis to address endogeneities in the proposed econometric models. The results yielded positive and economically substantial indications that increases in individual firm lobbying expenditures generate causal subsequent benefits to the corresponding individual firm accounting variables of unrecognized tax benefits and marginal effective tax rate (calculated with a formula by Blouin, et. al. as a more efficient measure of income and volatility adjusted tax rate). The analysis adds clarity and nuance to past research indicating effective tax rate changes from individual firm lobbying expenditures while improving the value and interpretation of the size of the estimate using Blouin et al.’s formula for tax rate. Other original contributions included more accurate and economically meaningful estimates of benefits from firm lobbying on this basis with updated data, tackling of previously unresolved endogeneity problems in the modeling with system gmm, and exploring new variables.

For my research, I won the Carl Menger Essay Contest of 2018 and presented through the Society for the Development of Austrian Economics at the Southern Economics Association Conference that year. In 2019, my updated research further won the Best Undergraduate Paper prize at the Jordan River Economics Conference hosted by Indiana University, Bloomington in cooperation with Omicron Delta Epsilon.

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