Lobbyists as Matchmakersin the Market for Access

Karam Kang Hye Young You

Carnegie Mellon University & Vanderbilt University

Motivation

Access to policymakers is reported as the most importantand scarce resource in lobbying process

Commercial lobbyists provide political access asintermediaries between interest groups and policymakers

Majority of the existing literature does not considerlobbying firms as independent agents

Motivation

Studying access has been a challenging task, mainly due tothe lack of sufficiently detailed data on lobbying contact

Foreign Agent Registrant Act of 1938 (FARA) mandatesregistration and semi-annual reports of lobbyists hired byforeign entities, containing following info:

1 Identity of contacted person

2 Type of contact (phone call, in-person meeting etc.)

3 Date of contact

4 Purpose of contact

Akin Gump Strauss Hauer & Feld Report

Akin Gump Strauss Hauer & Feld Report

Akin Gump Strauss Hauer & Feld Report

Akin Gump Strauss Hauer & Feld Report

What This Paper Does

1 We document how the access to the U.S. Congress isallocated by lobbying firms to foreign governments

2 We study what roles lobbyists play in this market. Morespecifically, we build a model of two-sided market for accesswhere a lobbying firm acts as matchmakers

3 We explore how the quality of matchmaking is associatedwith the characteristics of lobbyists

Commercial Lobbying Industry

Enormous growth of commercial lobbying industry in theU.S. over last two decades

Market revenue: $3 billion per year (federal only) and 70%of the spending is paid to lobbying firms

Over 2,500 lobbying firms and 12,000 registered lobbyistsat federal level

Data

Focus on lobbying activities on policy issues that arepotentially relevant to legislation

Analyze the lobbying reports that include at least onecongressional contact via phone calls or in-person meetings

452 bi-annual FARA reports submitted during 2008-2010by commercial lobbying firms on behalf of foreigngovernments

15,254 contact records: Congress (66%), Executive (21%),Media (5%), Others (8%)

Buyers in the Market for Access: Foreign Governments

83 foreign governments

On average, these governments

1 hire 2.3 lobbying firms

2 pay $1.3 million for lobbying fee

3 have access to 35 members of Congress via their lobbyists

Sellers in the Market for Access: Politicians

10,000 contacts made with members of Congress

Among 611 members who served in 110th or 111thCongresses, 588 members had at least one contact viaphone or meeting

On average, these members of Congress

1 have 17 contacts

2 have contacts with 5.8 lobbying firms

3 have contacts with 5.2 foreign countries

Sellers in the Market for Access: Politicians

0

10

20

30

40

0 50 100 150 200Number of Contacts

Num

ber

of P

oliti

cian

s

0

25

50

75

0 10 20 30 40Number of Firms

Num

ber

of P

oliti

cian

s

0

25

50

75

100

0 10 20 30Number of Foreign Governments

Num

ber

of P

oliti

cian

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John Kerry (D-MA)

John Kerry (D−MA) − Lobbying Firms Network

Patton Boggs

Hogan & Hartson

Akin Gump Strauss Hauer

DLA Piper

APCO Worldwide

Foley Hoag

Pillsbury Winthrop Shaw Pittman

Jones, Walker et al

Livingston Group

BKSH

BGR

Hecht, Spencer

Harbour Group

Whitaker Group

Rosemont Associates

Scribe Strategies & Advisors

Quinn Gillespie & Associates

McKenna Long & Aldridge

Parven Pomper StrategiesPrivate Public Solutions

American Business Development

Park Strategies

Dewey & LeBoeuf

Sorini, Samet & Associates

Stuart E. Eizenstat

Covington & Burling

Locke Lord Strategies

Manatt, Phelps & Phillips

Gephardt Group

Rasky Baerlein Strategic Communications

Sonnenschein Nath & Rosenthal

Podesta Group

The Raben Group

Advanced Practical Solutions

Nazmi Gur

Blue Star Strategies

Thomas Capitol Partners

Kerry

... and Other Members of Congress

Politicians with Single Contact

2165

3028

3492

3712

5356

5451

5666

57115753

5788

5802

58255830

5839

5856

5874

5915

5982

Rooney

Fleming

Napolitano

SalazarMurphy Schauer

DonnellyHerseth Sandlin

Cooper

Lahood

Burgess

Gilchrest

Simpson

Braley

Wilson

Gordon

Hagan

Maffei

Oberstar

Fattah

EmersonTiahrt

Jefferson

Mcnulty

Mikulski

Begich

Lance

MillerCastor

Stark

Barton

Carney

Teague

Brady

Pingree

Hodes

Kirkpatrick

Griffith

Intermediaries in the Market for Access: Lobbyists

113 lobbying firms and 71 firms in both LDA and FARA

On average, these lobbying firms

1 have 1.7 foreign countries

2 have 5.5 years of experience in FARA

3 contact 31 member in total

4 contact 57% Democrats, 62% House, 13% Committee Chair

Access Matters

(1) (2) (3)Log(Fee) Log(Fee) Log(Fee)

# Contacts 0.00312∗∗∗ 0.00316∗∗∗ 0.00300∗∗∗

# Contacts × UN Vote against the US 0.0597∗∗∗ 0.0490∗∗∗ 0.0414∗

Contact Characteristics Y Y YForeign Gov. Characteristics N N YFirm Fixed Eff. Y Y Y

N 226 226 196adj. R2 0.596 0.591 0.610

Note: Unit of obs is a lobbying report.

Who Gives Access to Foreign Governments?

(1) (2) (3) (4) (5)Contact Member Budget Trade Security

House -0.139∗∗∗ -0.270∗∗∗ -0.274∗∗∗ -0.137∗ -0.281∗∗∗

Democrat 0.0569∗ 0.0399 -0.0530 0.00681 0.0708∗

Leadership 0.0615 -0.0244 0.131 0.137 -0.000439Tenure -0.00130 0.00392 0.00762∗∗∗ -0.00311 0.00927∗∗∗

Vote Share ≤ 55% 0.0235 -0.0417 0.0225 -0.0752 0.0639Budget Comm. 0.0504 -0.000861 0.0598 0.0151 0.0523Security Comm. 0.103∗∗ 0.0673 -0.0439 0.00952 0.104Trade Comm. 0.131∗∗∗ 0.236∗∗∗ 0.170∗∗∗ 0.265∗∗∗ 0.0947Foreign Comm. 0.183∗∗∗ 0.531∗∗∗ 0.178∗ -0.0410 0.493∗∗∗

N 548 548 548 548 548adj. R2 0.041 0.082 0.127 0.021 0.140

Note: 111th Congress, ∗ (p< 0.10), ∗∗ (p<0.05), ∗ ∗ ∗ (p<0.01).

Which Foreign Governments Receive Access?

(1) (2) (3) (4) (5)Contact Member Budget Trade Security

Democracy -0.0372 0.0700 0.0571 -0.0549 -0.0417Autocracy 0.126 0.0434 0.167∗∗ -0.0546 0.0704UN Vote for US 0.519∗∗∗ 0.452∗∗ 0.319∗∗ 0.0657 0.204ln(GDP PC) 0.0120 0.00881 0.00376 0.0151 -0.0455ln(Import from US) 0.0170 0.0241 0.0105 0.0478∗ 0.0133ln(Export to US) 0.0545∗∗∗ 0.0273∗ 0.0264∗∗ 0.0146 0.0206ln(US Aid) 0.00733∗∗ 0.00566∗ 0.00405∗ 0.00291 0.00146N 184 184 184 184 184adj. R2 0.159 0.115 0.074 0.083 0.065

Note: 111th Congress. All independent variables measured in 2005.

Who Gives Access to Which Lobbying Firm?

(1) (2) (3) (4)Contact Contact Member Member

Contribution in 2008 0.0130∗ 0.0119∗ 0.00750∗ 0.00785∗

Ex-staffer -0.0128 -0.0285 0.0361 0.0277Democrat × Dem. lob. 0.112∗∗∗ 0.112∗∗∗ 0.0133 0.0133Democrat × Rep. lob. -0.0499∗∗∗ -0.0499∗∗∗ -0.0200∗∗∗ -0.0200∗∗∗

Leadership × Rev. lob. 0.0851∗∗∗ 0.0852∗∗∗ 0.00658 0.00660Committee × Rev. lob. 0.0113 0.0113 -0.000830 -0.000839Years of Experience 0.00358∗∗∗ 0.00359∗∗∗ 0.000793∗∗∗ 0.000789∗∗∗

Lobbying Firm Char. Y Y Y YPolitician Char. Y N Y NPolitician Fixed Eff. N Y N Y

N 19180 19180 19180 19180adj. R2 0.053 0.068 0.012 0.017

Note: Unit of observation is a firm-politician pair. 111th Congress.

Matchmaker, Matchmaker, Matchmaker

Lobbying firms offer a matching service between theirclients and politicians

When a lobbying firm has multiple clients, they contact adifferent set of policymakers for different clients

Ratio of Democrat Contacts

Akin Gump Strauss Hauer & Feld, LLPAmani Group

APCO WorldwideBarbour, Griffith & Rogers

BKSH & AssociatesCassidy & Associates

Chlopak, Leonard, Schechter & AssociatesCovington & Burling

Dewey & LeBoeufDLA Piper US

Fierce, Isakowitz & BlalockFleishman−Hillard

Foley Hoag LLPGephardt Group Government Affairs, LLC

Glover Park GroupGreenberg TraurigHogan & Hartson

Johnson, Madigan et alKRL InternationalLivingston Group

Loeffler GroupMark Saylor Co

MITA GroupO'Brien & Associates LLC

Orion StrategiesParven Pomper Strategies Inc.

Patton BoggsPillsbury Winthrop Shaw Pittman

Podesta Group, Inc.Private Public Solutions LLC

Qorvis CommunicationsQuinn Gillespie & Associates

Rasky Baerlein Strategic CommunicationsSamuels International Associates

Sorini, Samet & AssociatesVan Scoyoc Associates

Venable LLPWhitaker Group

White & Case

0 1Democrat Contact Ratio

DLA Piper and Its Two Clients

Matchmaker, Matchmaker, Matchmaker

Lobbying IssuesMatched Congressmen Trade Budget Security Admin.

No. Foreign Governments 39 38 55 56Leadership or Chair(%) 17.2 20.6 10.7 14.0Electorally Sensitive(%) 8.9 14.8 18.4 16.5Budget Comm.(%) 4.9 18.7 8.5 11.5Security Comm.(%) 6.2 7.1 13.0 13.2Trade Comm.(%) 28.7 13.3 13.8 12.6Foreign Affairs Comm.(%) 13.0 15.3 24.6 13.8

Matchmaker, Matchmaker, Matchmaker

Lobbying IssuesMatched Gov. Agencies Trade Budget Security Admin.

No. Foreign Governments 36 36 51 51Department of State (%) 9.2 7.6 10.8 8.6USTR (%) 8.8 2.4 0.3 1.2Department of Defense(%) 1.0 3.9 6.2 3.5Departments of Treasury(%) 7.3 2.3 0.5 2.9

Model: Framework

Adopt a many-to-many matching model with aprice-discrimination platform, developed by Gomes andPavan (2015)

Foreign governments (interest groups) are on one side of themarket for access, and policymakers are on the other side

A lobbying firm charges a price (which can be positive ornegative) to an agent on one side in exchange for matchingwith a set of agents on the other side

Model: Diagram

Predictions on the Matching Set

Negative assortative matching

Policymakers whose valuation of information from foreigngovernments is greater than a certain threshold value arematched to a particular foreign governments, and thisthreshold decreases in that foreign government’s valuationof political access

Negative Assortative Matching

Negative Assortative Matching

Inherent valuation of foreign governments andpolicymakers are unobservable

The higher an agent values the contacts with the agents inthe other side, the more the agent will be matched with

Negative Assortative Matching: By Politicians

050

100

150

200

250

Ave

rage

# o

f Mat

ched

U.S

. Pol

icym

aker

s

0 10 20 30# of Matched Foreign Governments

Trade Budget Security Administrative

Negative Assortative Matching: By Country

010

2030

40A

vera

ge #

of M

atch

ed F

orei

gn G

over

nmen

ts

0 50 100 150 200# of Matched Policymakers

Trade Budget Security Administrative

Contributions

1 Conduct a comprehensive empirical analysis for the marketfor political access

2 Introduce and document the role of lobbying firms in thepolicymaking process as matchmakers

3 Provide a micro-foundation of why political connectionmatters

Future Directions

1 Exploit the turnover of lobbyists to document how thetypes of contacts, matching quality, and lobbying fees areassociated with lobbyist fixed effects

2 Explore how diplomatic relationship with the US or various(unexpected) events in foreign governments influence access