Going Into Government: How Hiring from Special Interests Reduces Their Influence

Joint with Janna King Rezaee.

Governments routinely decide whether to publicly provide services or to allow private entities to provide them. Private provision comes at a cost: private providers are special interests and can design those services according to their own preferences. Many are concerned that this cost increases when people aligned with special interests (who we call “biased outsiders”) go into government. Using a formal model, we demonstrate this is not necessarily the case. We have two core findings. First, when a biased outsider goes into government, this paradoxically reduces the special interest’s influence over the design of public services. Second, the biased outsider has an endogenous incentive to enter government even though this weakens the special interest, whose preferences the biased outsider shares. The model suggests that politicians’ efforts to prevent the hiring of biased outsiders, such as lobbyists, can counterintuitively increase special interest influence over politics.

Selected Presentations: SPSA Conference (January 2019, Austin TX)