Impact of Money in Politics on Labor and Capital: Evidence from Citizens United v. FEC



The perceived increase in corporate political influence has raised concerns that corporations push to enact policies that benefit capital and harm labor. We examine the effect of money in politics on political and economic outcomes using the surprise Supreme Court ruling in Citizens United v. FEC (2010), which rendered key restrictions on political spending unconstitutional. The decision affected states that previously banned political advertising funded by corporate money (treated states), but did not impact states without such bans (control states). Surprisingly, money in politics appears to increase political competition rather than entrench already-connected business interests. Treated states experience significant political turnover and adopt more growth-friendly enforcement and legislative policies. These policies grow, rather than redistribute, economic output, with gains accruing to labor and to some extent capital. In support of our mechanism, gains are concentrated in firms that are less ex-ante politically connected and among industries without strong political ties. Our results suggest that counterintuitively, money in politics has a democratizing role relative to other forms of political  influence.

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Meeting ID: 915 5625 8243