Economic Power and Political Influence: The Impact of Industry Structure on Public Policy

Abstract

Political scientists have devoted considerable attention to the ways in which economic power can be translated into political influence. Yet there has been little empirical research capable of confirming or denying general hypotheses about the political implications of various aspects of economic structure. This article seeks to begin filling this gap by first identifying five aspects of economic structure likely to affect an industry's political influence (firm size, industry size, market concentration, profitability, arid geographic dispersion) and then testing these aspects by analyzing how well they account for variations among industries in their success at securing public policies of benefit to them, especially in two policy arenas: federal corporate income taxes and state excise taxes. What emerges most clearly from this analysis is an empirical confirmation of the popular hypothesis linking firm size to political influence with respect to both federal corporate tax policy and state excise tax policy. Beyond that, we find reasonably strong negative relationships between political influence and market concentration, profitability, and industry size – the latter lending interesting support to Mancur Olson's argument about the political disabilities of large groups. In the process, the article suggests a potentially fruitful new way to get beyond the case study approach in studying the impact of economic power on political influence, and thus a way to bring to bear more powerful methodological tools on this central issue of modern democracy.