Working Paper: CEPR ID: DP12182
Authors: Rui Esteves; Gabriel Geisler Mesevage
Abstract: In the 1840s, speculation in railway shares in the UK prompted the creation ofhundreds of new railway companies. Each company needed to petition Parliamentfor the approval of new railway routes. In this paper, we investigate whether parliamentaryregulation of the new railway network was distorted by politicians' vestedinterests. Drawing on methods from peer-effects analysis, we identify situations whereMPs could have traded votes with specific colleagues in order to get their preferredprojects approved (logrolling). We confirm that logrolling was both prevalent andsignificant. Our estimates suggest that at least a quarter of approved lines receivedtheir bills because of logrolling. Companies approved through logrolling also underperformedin the stock market during the railway bubble and after its final crash in1847.
Keywords: voting; networks; rent-seeking; railways
JEL Codes: D72; N44; N73
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| logrolling (D72) | underperformance in stock market of approved companies (G18) |
| logrolling (D72) | lower Tobin's Q values for logrolled firms (L15) |
| logrolling (D72) | success rate of projects for MPs (H43) |
| logrolling behavior among MPs (D72) | approval of railway bills (L92) |
| connections in the logrolling network (D85) | voting behavior of MPs (D72) |