Working Paper: NBER ID: w24451
Authors: Marianne Bertrand; Matilde Bombardini; Raymond Fisman; Francesco Trebbi
Abstract: We explore the role of charitable giving as a means of political influence, a channel that has been heretofore unexplored in the political economy literature. For philanthropic foundations associated with Fortune 500 and S&P500 corporations, we show that grants given to charitable organizations located in a congressional district increase when its representative obtains seats on committees that are of policy relevance to the firm associated with the foundation. This pattern parallels that of publicly disclosed Political Action Committee (PAC) spending. As further evidence on firms’ political motivations for charitable giving, we show that a member of Congress’s departure leads to a short-term decline in charitable giving to his district, and we again observe similar patterns in PAC spending. Charities directly linked to politicians through personal financial disclosure forms filed in accordance to Ethics in Government Act requirements exhibit similar patterns of political dependence. Our analysis suggests that firms deploy their charitable foundations as a form of tax-exempt influence seeking. Based on a straightforward model of political influence, our estimates imply that 7.1 percent of total U.S. corporate charitable giving is politically motivated, an amount that is economically significant: it is 280 percent larger than annual PAC contributions and about 40 percent of total federal lobbying expenditures. Given the lack of formal electoral or regulatory disclosure requirements, charitable giving may be a form of political influence that goes mostly undetected by voters and shareholders, and which is directly subsidized by taxpayers.
Keywords: Corporate Philanthropy; Political Influence; Charitable Giving; Political Action Committees; Corporate Social Responsibility
JEL Codes: G28; P16; P48
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| political influence (D72) | charitable giving (D64) |
| departure of a member of Congress (J63) | charitable giving (D64) |
| political dependence of charities (L31) | corporate foundations (G30) |
| politically motivated charitable giving (D64) | total U.S. corporate charitable giving (D64) |
| politically motivated charitable giving (D64) | total federal lobbying expenditures (H59) |