TY  - JOUR
AU  - Cohen,Lauren
AU  - Coval,Joshua D.
AU  - Malloy,Christopher
TI  - Do Powerful Politicians Cause Corporate Downsizing?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15839
PY  - 2010
Y2  - March 2010
UR  - http://www.nber.org/papers/w15839
L1  - http://www.nber.org/papers/w15839.pdf
N1  - Author contact info:
Lauren Cohen
Harvard Business School
Baker Library 273
Soldiers Field
Boston, MA 02163
Tel: 617/495-3888
E-Mail: lcohen@hbs.edu

Joshua D. Coval
Harvard Business School
Soldiers Field
Boston, MA 02163
Tel: 617/495-5056
Fax: 617/496-8443
E-Mail: jcoval@hbs.edu

Christopher Malloy
Harvard Business School
Baker Library 277
Soldiers Field
Boston, MA 02163
Tel: 617/495-4383
E-Mail: cmalloy@hbs.edu
AB  - This paper employs a new empirical approach for identifying the impact of government spending on the private sector. Our key innovation is to use changes in congressional committee chairmanship as a source of exogenous variation in state-level federal expenditures. In doing so, we show that fiscal spending shocks appear to significantly dampen corporate sector investment and employment activity. These corporate reactions follow both Senate and House committee chair changes, are present among large and small firms and within large and small states, are partially reversed when the congressman resigns, and are most pronounced among geographically-concentrated firms. The effects are economically meaningful and the mechanism - entirely distinct from the more traditional interest rate and tax channels - suggests new considerations in assessing the impact of government spending on private sector economic activity.
ER  -