We saw in Chapter 1 that by strengthening the principal–agent relationship between electorates and politicians, democratic governance can protect against collective choices that overly serve concentrated economic interests and thus improve the welfare of consumer electorates while expanding society’s economic opportunities more generally. But we also raised the principled concern that electorates can pursue their own concentrated interests, even at the expense of efficiency, and showed that this concern gives rise to a theoretically robust and observable implication – when democratic governance goes too far, firms curb their productive activity and market output decreases as a result.
The US telecommunications sector offers an attractive quasi-experimental setting in which to empirically evaluate this relationship. Importantly, institutions that influence the strength of democratic governance (e.g., campaign finance laws, election and appointment processes, voter registration rules),...
KeywordsFederal Communication Commission Democratic Institution Campaign Contribution Democratic Governance Campaign Finance
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