Returning The Favor: The Effect of Campaign Contributions on Federal Assistance

The impact of money in U.S. presidential elections has long been debated. Building upon principal-agent models, I test whether and to what extent the President returns the campaign contributions back to the state in the form of federal assistance. I expect that more campaign contributions from a state are associated with more federal assistance to that state in the next cycle, implying the President’s conscious interference in the federal assistance granting process. I compile a state-level dataset of federal assistance records and FEC campaign contributions for Jan 2001–Dec 2020, covering Bush’s second term, Obama’s two terms, and Trump’s first term. Using fixed effects regressions, I find confirming evidence for my theory. A one-percent increase in per capita contributions is associated with an average 0.29 percent increase in per capita federal assistance in the following cycle. This effect does not vary between the winning or losing candidate, suggesting that donating to either candidate similarly increases federal assistance. Furthermore, federal agencies exhibit various levels of associations, with NSF and NASA ranking the highest and VA the lowest. A further probe into sample heterogeneity suggests that the first-term Presidents are more likely to react to contributions favorably. In contrast, swing states receive less federal assistance from higher contributions compared to non-swing states.