Returns to Political Contribution in Housing Markets

Rui Yu, Business Economics and Public Policy, The Wharton School

Abstract: Are there returns to political contribution? This paper investigates whether political donation influences regulation in the market for one of the largest asset classes in the U.S.—real estate. Using new data on local campaign donors linked to sellers of new construction in Corelogic, a regression discontinuity design tests whether political contribution purchases regulatory outcomes. Donating around a thousand dollars to a narrowly elected mayor significantly increases the donor’s sales of new construction by 12 percent. Nesting these estimates in a model of a competitive policy market, I derive the price of a regulatory permit in U.S. municipalities; a firm can pay a mayor $67, 567 for regulatory approval of new housing. These findings are consistent with a modest investment return on contributing to a local politician in the U.S.

Read the full working paper here (PDF).