Policy uncertainty and demand for revolving-door lobbyists

Abstract

Interest groups spend large sums of money hiring lobbyists often as a form of insurance against the risk of undesirable policy change. This theory of lobbying as political insurance needs systematic testing. Previous experience serving in government makes lobbyists more valuable as providers of political insurance. The insurance theory of lobbying thus points to an empirical link between policy uncertainty and interest groups’ demand for these “revolving-door lobbyists” with previous government experience. I examine this link using complementary sets of panel analysis of lobbying activity by companies in four economic sectors over an 11-year period. They draw on a sector-specific and time-variant measure of policy uncertainty based on analyzing companies’ discussions of policy risks in annual 10-K filings submitted to the US Securities and Exchange Commission. In all four sectors companies’ preference for revolvers increases in response to policy uncertainty relative to conventional lobbyists.