Returns to Political Contributions in Housing Markets

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

Abstract: This paper investigates whether firms donate to political campaigns in order to influence supply in local housing markets. Using new data on campaign donors of U.S. mayoral candidates and a regression discontinuity design, I uncover three findings. Consistent with political favors, connection to the mayor causes residential development firms to sell more new housing units. Favors to donors lead to more housing units in a city, since mayors receiving more donations from residential developers double permits for new housing construction. But differences in policy between mayors are quantitatively more important than favors for determining local housing supply.

Read the full working paper here (PDF).